On its face at least, it seems to make some sense as a way to get from a pay-as-you-go plan to a retirement savings system. But, I have two concerns, one specific and one general. The specific concern is this statement:
It is reasonable to expect firms managing personal retirement account assets to receive compensation for their services; after all, there will be some 148 million accounts to manage. By limiting options and structuring the accounts carefully, administrative fees could be reduced.Let's see, NCPA is projecting that private accounts will ultimately "average" $330,000 per person and that there will be 148 million such accounts, so the total projected investment in these accounts would be close to $50 trillion dollars. At a cost rate of 0.2 percent (the midpoint of the proposals cited by NPCA, the administartive costs would then be $100 billion . . . per year?! Holy cow! Can they really be serious?
The 1994-1996 Advisory Council on Social Security assumed administrative costs of 0.105 percentage points for the Individual Accounts option.
The President’s Commission to Strengthen Social Security assumed administrative costs of 0.3 percent. (Footnotes omitted).
The second and more general concern is that I don't know enough to evaluate the numbers they throw around. In an effort to address this problem I posted a request for help as a comment to Kevin Drum's latest post on SS. But, I suspect that will get lost in the noise there, so I may try e-mailing Kevin and a few others to see if I can get a reactions. If I do, I will link them here.
In the meantime, though, if there is anyone reading this that has any thoughts on the plan let me know.
2 comments:
The last place one ought to go to get advice about SS is Kevin Drum's blog. Here's someone who actually knows of which he writes:
http://www.scrivener.net/2005/01/social-security-posts.html
Roland --
Thanks for the lead. I read the first post on his list and it does seem worth the trouble to read the rest.
However, I sent the query to Drum (and Ygelsias and Atrios and Max) not becuase I think they are the "best" sources of information on SS, but becuase I wanted them to tell me what they thought was wrong with the NPCA plan. Since it advocates private accounts and a phase-out of the pay-as-you-go model, I figured that they would be good places to get a critique. (BTW; I did get a response -- sorta -- from Kevin that I will post -- after dinner).
My goal here is to try and undertsand the issue, but given the extent to which it has been politicized, there is almost no way to find a "balanced" view from any one place. So, I keep bouncing back and forth. In this effort, I will add Scrivener to my reading list.
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