In fact, during the 2010 Elections, President Obama tried to dissuade voters by claiming Republicans wanted to privatize Social Security, even though few Republican candidates ran under such a position—which isn’t surprising, considering most of their constituents are on Social Security!
Republicans, despite their rhetoric against Social Security, have been reluctant to impose any serious reform, while Democrats have been warning against the dangers of privatization, claiming it would subjugate senior citizens to the greed of corporate fatcats and the unpredictability of the stock market.
But the Democrats’ fear of privatizing Social Security has proven to be as irrational as Chicken Little’s fear of the sky falling, especially when one considers countries like Chile.
One of the most economically prosperous countries in South America, Chile privatized its Social Security-like system over 30 years ago, and as New American reported, the privatization has proven to be a huge success:
Prior to May 1, 1981, the Chilean system required contributions from workers and was clearly in grave financial trouble. Instead of nibbling around the edges to shore up the program for another few years, José Piñera, Secretary of Labor and Pensions under Augusto Pinochet, decided to do a major overhaul of the system…Of course, Democrats are well-aware of Chile's privatized system, and have been highly vocal against it.
…The system still required contributions of 10 percent of salary, but the money was deposited in any one of an array of private investment companies. Upon retirement, the worker had a number of options, including purchasing an annuity for life. Along the way he could track the performance of his account, and increase his contribution (up to 20 percent) if he wanted to retire earlier, or increase his payout at retirement.
How well has the system performed? John Tierney, a writer for the New York Times, went to visit Pablo Serra, a former classmate and friend in Santiago a few years ago, and they compared notes on how well their respective retirement programs were doing. Tierney brought along his latest statement from Social Security, while his friend brought up his retirement plan on his computer. It turned out that they both had been contributing about the same amount of money, so the comparison was apt, and startling, said Tierney:
Pablo could retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age. ORTierney wrote that Pablo said “I’m very happy with my account.” Tierney suggested that, upon retirement, Pablo could not only retire nicely, but be able to buy himself a vacation home at the shore or in the country. Pablo laughed it off, and Tierney wrote: “I’m trying to look on the bright side. Maybe my Social Security check will cover the airfare to visit him.”
Pablo could retire at age 65 with an annual pension of $70,000. That would almost triple the $25,000 pension promised [to me] by Social Security starting a year later, at age 66. OR
Pablo could retire at age 65 with an annual pension of $53,000 and [in addition receive] a one-time cash payment of $223,000.
According to Investors Business Daily, the average annual rate of return for Chilean workers over the last 30 years has exceeded 9% annually, after inflation, whereas “U. S. Social Security pays a 1% to 2% (theoretical) rate of return, and even less for new workers."This was anticipated by Piñera when the plan was originally designed and implemented in 1981. In reviewing the success of the plan after just 15 years, Piñera said, “The Chilean worker is an owner, a capitalist. There is no more powerful way to stabilize a free-market economy and to get the support of the workers than to link them directly to the benefits of the market system. When Chile grows at 7 percent or when the stock market doubles … Chilean workers benefit directly, not only through high wages, not only through more employment, but through additional capital in their individual pension accounts.”
As expected, the capital accumulated in these privatized accounts have generated substantial growth in Chile’s economy. As noted by Wikipedia, “Chile is one of South America’s most stable and prosperous nations, leading Latin American nations in human development, competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.” [Emphases added.]
High domestic savings and investment rates helped propel Chile’s economy to average growth rates of 8% during the 1990s. The privatized national pension plan (AFP) has encouraged domestic investment and contributed to an estimated total domestic savings rate of approximately 21% of GDP.
Last year, when Republican Senate candidate Sharron Angle suggested implementing such a system, Democrats attacked her in a television ad, accusing her of emulating “military dictator” and “human rights violator” Augusto Pinochet whose "privatization scheme has resulted in hidden fees, fewer benefits and millions of people with no coverage."
Fact-checking website Politifact deemed the ad’s claims to be “Barely True.” But what else can you expect other than dishonesty when Democrats are practically defending a Ponzi scheme?