RE: Response to Karl Sweetman

[Javier Jimenez <jimenj@yahoo.com>]

>>>>> PANELIST: Rep. Jim Kolbe wrote:
Another option we considered was a voluntary opt-out.  Unfortunately, we
discovered that "cherry picking" under the new system --  a process where
the wealthy and the young opt out, but the aged and the poor remain in the
traditional system -- would seriously undermine the financial stability of
Social Security.
<<<<<

I believe this comment merits some disecting.  If "cherry picking"
is a consideration under a voluntary opt-out system, then we need
to look real hard at the actual reasons for this phenomenon.  Why
would the young and the wealthy, in particular, opt out?  I believe
that this is the result of two widely accepted reasons.  The wealthy
know that investment in the private financial markets is the only
way to accumulate wealth, and that SS will not in any way provide
enough for anyone to live confortably in retirement or during a
disability.  Younger workers are realizing this same opportunity
and know that time is on their side to make those contributions
provide a better retirement or disability benefit than SS could
ever provide.  Then, we have the real-life experiences of Chile
and the other contries that have privatized their SS systems.  In
Chile, voluntary participation sky-rocketed to near 95% a few years
after the initial wave of participants began their private plans.
Privatization has had an enormous positive impact on the overall
economy of Chile, as well as its society.  I do believe that, if
given the opportunity, an overwhelming majority of workers will
opt-out, not just the young and the wealthy, because they know that
financial freedom and security can only be achieved away from SS's
far reaching arm.

It is a fact that the SS trust fund, in the past, provided the
government with additional funding for its, perhaps innecessary,
spending, so the government could perhaps reciprocate in kind by
allowing workers to take responsibility for their lives and tightening
its spending habits to fund the transition of those workers that
do opt-out.