Subject: RE: More on Risk: A Response to Mr Reischauer
>>>>>> James wrote:
>From: Andre Dermant
>At the very end of his comment, he [Reischauer] states that his example is "extreme". Then, if it is extreme, it is NOT representative; if fact it is irrelevant and misleading and not helpful in the discourse.
You miss the point Andre. In moving from a collective insurance type system with shared societal risk to an individual account system, equal investment 'efforts' can produce vastly different results. The fact that it is extreme, not normal or not representative doesn't change the fact that it will occur for millions of people. With the current SS, bumps in the economy are 'smoothed' or averaged out to the individual. Not so with individual accounts.
Those are real people who will be affected and that has political consequences that should be considered BEFORE we make any reform decision.
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Just because benefits remain constant during economic downturns does not mean that beneficiaries have been shielded from the effect of the downturn. The government of course has to balance the in side of the equation with higher taxes, fees, etc. Even if those taxes and fees are not levied on the beneficiaries, they affect them, nonetheless, by changes in prices due to many factors; one I could think is: the higher taxes now paid by the beneficiary's doctor will cause the doctor's fees to go up. Ooops!, a hole in the safety net; perhaps, then we should propose government controlled pricing so that beneficiaries are truly protected. Or better yet, why don't we all move to China and have the government protection afforded to all Chinese.
