Investing Is Not The Issue 

As I listen to more and more of the Social Security rhetoric... I'm amazed at how much everyone is avoiding the real issue. There is a whole group of people who are afraid of giving people choice. People are supposedly afraid of choice... afraid of having too many choices, or making the wrong choice? There is a whole other group of people who are opposed to reform because they've paid into the current system and are scared to death that they won't get their money back. They fear private investment because it's different. What they don't get is that its really no different than the current system... but the Democrats in Congress don't want you to know that, and George Bush isn't helping any.

Recently he stood in a news conference with a file cabinet full of IOU's and pronounced how shocked he was at a system based around money that wasn't there any more. It was perhaps the stupidest thing that he could have done. The reason it was so stupid was because the proposed solutions are exactly the same. Let me repeat that for emphasis. The proposed solutions to Social Security are exactly the same. For some reason when it comes to Social Security, people seem to forget (or maybe they honestly don't know) what happens to money put in a bank. Granted I'm no expert in investing (and please count this as a disclaimer about anything I'm saying here), but lets go over Banking 101.

What happens when you put money in a bank? Do you think that it is identical to putting your money in a mattress? Do you think that the nice people at the bank decide to give you extra money every month out of the goodness of their heart? No! The bank uses that money for loans and other investments which makes more money. The Bank then gives you a cut of the profit for risking your money. Of course that cut varies depending on the risk involved in the loan. Even putting your money in a simple savings account entails some risk (though obviously small). Social Security is no different. Your money is not stuffed in some government mattress. It is invested and gains interest. The problem is that the interest is paltry because of where your money is invested.

So Nick... if the government is already investing my money... how are these new proposals any different? And where is my money being invested anyway? The answer is very simple. Right now you are forced to invest all your money in the government. The new "private accounts" proposals allow you invest in stocks, or bonds, or other private investments. In other words you are allowed to invest in the economy. That's it. That's the difference. You're still going to be investing, just in something else. And that something else means you have a potential higher rate of return than Uncle Sam would ever give you.

What this means however, is that if private accounts come into being, the government loses a huge chunk of capital. Personally I see this as a good thing. I personally think that putting more money in our economy, helping businesses, and helping our economy to grow, is a great thing, and an excellent secondary benefit of Social Security reform. It could mean more jobs, and better jobs than we have now. I also think that taking away some money from the government is also a very good thing. Taking away that money is the real reason why so many in Congress are fighting this tooth and nail. Don't delude yourself into thinking its for some well founded fears over your well being. They just don't want to lose the money that they can divert into their pet projects. This is about government greed and influence... pure and simple. Investing is not the issue. Where you get to invest is.