L. Neil Smith's
THE LIBERTARIAN ENTERPRISE
Number 319, May 15, 2005
"The End of America"
Galveston, Oy Galveston
Exclusive to TLE
Such kvetching and wailing about the Social Security System. The Democrats are insisting that the Bush plan is racist, sexist, ageist, fiscally irresponsible, and a repudiation of the great Leftist icon, Franklin D. Roosevelt. The Republicans are sure they're not any of those things but they are so cowardly that they will not fight to make the changes.
There are all sorts of ephemeral reasons cited by the GOPers in defense of such things as partial privatization but there are few actual facts that seem to make the argument.
One of the greatest examples of how well a privatized system would work exists and would make powerful rhetoric in the argument but for some reason, nobody wants to talk about it. Gaveston County, Texas.
What I can't figure out is why the Republicans haven't been citing the Galveston experiment all along as a reason why privatization of Social Security could work. Even President Bush seemed to ignore Galveston until his sixty day S/S reform blitz in March and April of 2005. The opposition was allowed to make ridiculous charges about the evils of any private accounts and the GOP refused to use the powerful weapon of precedent in rebuttal.
In 1996, the National Center for Policy Analysis did a study of the retirement systems adopted by Galveston and a few other Texas counties (BA #215) to see what the results of privatization would be. The results are astounding.
An employee of 40 years, making $20,000 per year, would have a lump sum of over $380,000 in his retirement account. He might choose to take monthly payments of $2740 per month for life as opposed to $775 per month from Social Security.
An employee of 40 years, making $50,000 per year would have some $950,000 in his account or he could take monthly payments of $6843 per month compared to $1392 per month from Social Security.
The disability part of the plan would provide the injured worker 60 percent of his salary up to age 65, at which time he would switch to the retirement plan. Social Security provides a sum determined by the workers S/S earnings. Even at the $20,000 salary level, the amount would be about equal to the Social Security Disability stipend.
There is also a life insurance component to the Galveston plan which would provide from $50,000 to $150,000 compared to Social Security's $255 restricted death benefit.
If you would like to read about how the whole Galveston plan came to be, check out this article in Liberty Haven by: Ed Myers.
A 1999 report by the General Accounting Office (a government agency under the Clinton Administration) said low paid employees would fare better under the current S/S system than they would under the Galveston county plan, while higher paid employees and employees without children would seem to do better with the alternate plans.
But Brazoria County Judge John Willy says, "That's just not true. In almost every case, county workers make double what they would make with Social Security."
"A county judge or a county tax collector is going to make more because they are putting more in during their lifetime, but someone making a lower salary is getting the same high rate of return on their money,"
In that study, he says, researchers used not the 6-1/2 percent average rate of return on investments that county workers have actually received since the programs began, but a 4-1/2 percent average rate of return.
Further, says Judge Willy "A county judge or a county tax collector is going to make more because they are putting more in during their lifetime, but someone making a lower salary is getting the same high rate of return on their money,"
Makes sense to me.
Yet another judge, or rather a former judge, Ray Holbrook says:
"The Alternate Plan has been successful for the past 18 years with a return on retirement investments of about 6-1/2%. That is at least three times the return on a like investment in Social Security right now. Even though the return from a stock market investment would have significantly increased the actual return, there was much less risk potential in buying annuities with guaranteed returns."
And: "Alternative plans have worked. There are many happy employees and retirees from forward-thinking Texas counties that could attest to the benefits of embracing these alternatives.".
Of course, those opposed to the Galveston plan gleefully trumpet these flawed conclusions as reasons why the average American should fight against any change in the status quo. As in: Media Matters to America.
In may of 2000. Texas Senator Kay Bailey Hutchinson on the floor of the Senate said, in response to criticism of the Galveston plan by Sen. Barbara Boxer:
"In her discussion," said Sen. Hutchinson, " she (Sen. Boxer) took on the issue of some of the Texas municipalities that had chosen to opt out of Social Security and attempted to show they were doing less well than anyone in the Social Security system today. I want to refute some of those remarks, especially the ones that referred to these counties in Texas, and give the other side of the story".
And: "Just in the last few minutes, I talked to the county judge of Galveston County, Judge Yarborough, who is a very good Democrat, a very good person, and is doing a good job in Galveston County. He says in the 5 1/2 years he has been county judge, he has never had one complaint from an employee in Galveston County and, in fact, has had many retirees come up to him and say how glad they are that they have their own retirement system rather than having been forced into the Social Security system back in the eighties when they were allowed to opt out."
This speech was made five years ago, yet the Bush administration and their supporters in Congress haven't made the Galveston plan the centerpiece of their attempt to enhance S/S with some form of privatization. Makes you wonder.
I don't have any real hope that the Social Security system will be changed in any meaningful way. I only wish the Republicans and the Bush Administration would have used the Galveston alternative, over the last four years, to get the word out to those who seem so susceptible to the blandishments of the Democrats and their minions in the AARP.