Flash! Workers no longer have to worry about whether they will have enough money to sustain them in retirement. The problem has been fixed without reducing benefits and without raising taxes. That would be good news if it were about America. Unfortunately, the news is about Sweden, Mexico, Great Britain, even Poland, and many other countries where some form of privatization is far outpacing state-run pension systems. In Sweden last year, the stock market value of retirement funds increased 71 percent. In Mexico, it was 80 percent. Poland? 44 percent. Great Britain's 18 percent increase was much greater than the outmoded state retirement scheme, which 80 percent of the work force has chosen to leave. It is the same for every other country that has opted out of a top-heavy and costly taxpayer-supported system in favor of privatization. Equities grew 28 percent in Argentina, 12 percent in Australia, a whopping 49 percent in El Salvador and 69 percent in Hong Kong, 37 percent in Peru and 40 percent in Hungary, according to Heritage Foundation policy analyst David John. In the United States, where nearly half of the country now owns at least some stocks, American workers remain trapped in a government system that by law requires them to pay record-high payroll taxes, earning very low returns that cannot be invested. This creaking system relies on the ability and willingness of the next generation to subsidize current retirees. The money cannot be passed on to the worker's children or grandchildren when the retiree dies. Why does the United States, which is pioneering in technology, remain in the Dark Ages when it comes to retirement? As with so much else, it's about politics and control. Liberal Democrats have used Social Security as a weapon. They frighten the elderly, telling them that conservatives want to sever their threadbare lifeline and set them adrift to die in poverty and squalor so that "the rich" can have more money to pay for the increasing cost of yacht fuel. Allowing retirees to be independent of government would mean they could be independent of politicians who increasingly rely on the elder vote to sustain themselves in office. The evidence that the privatized system works is compelling. It has succeeded in many diverse economic and political systems. All it needs in the United States is a politician with the guts to close the deal with the electorate and safeguards which would ensure against an unlikely economic collapse. Once people realize how well other countries are doing and how poorly they will do by comparison, they will opt for the plan that gives them more money for their own retirement. The Australian stock market grew 12.5 percent last year. Australian workers invested 9 percent of their income in personal accounts to pay for future Social Security benefits. Although this is less than the American system's 10.6 percent retirement payroll tax (which includes both the employer's and employee's share), Australians can expect higher benefits because their taxes earn more. The difference between what an Australian retiree earns and what his or her American counterpart receives amounts to hundreds of thousands of dollars. It's the same in every other nation where privatization has been tried. After some reluctance, the programs have seen massive conversions from faith in the government system to fervor for the private one. The U.S. stock market rose 19 percent last year, but not a penny was added to our Social Security system. The average American family can expect to "earn" just 1.2 percent on its Social Security taxes. If that family's retirement taxes had been invested in stock index funds and government bonds, they could retire with $525,000 more than Social Security will provide. And that's their own money, not money paid by future workers in a tax system that is broken and cannot be fixed. According to the World Bank, every Latin American country, except Cuba, will have a private retirement system this year. Why are these countries headed toward the first world and we are behaving like a third-world nation and even continuing to tax Social Security benefits? Congress has voted to remove the ceiling on what retirees can earn without affecting their Social Security income. That doesn't fix the problem. Privatization will.
© 2000, Los Angeles Times Syndicate