I solicited a response to my post Social Insecurity – Investment Rules Need Rethinking from Arun Muralidhar a co-author of the book that I mentioned, Rethinking Pension Reform, by Franco Modigliani and Arun Muralidhar, Published October 2004.

I posted it as a comment to that other item, but RichardH urged me to make it more prominent.

Here is what Arun Muralidhar gave me permission to post:

I think the privatization folks have realized that privatization is a pipe dream (especially given that even the Chileans have reformed their system away from privatization) and the market collapse of 2008 demonstrates how individuals who were unlucky to be conceived in the wrong year and month could have been left in poverty at retirement if they were in DC plans. Also, the folks who support no change to current way of financing benefits have got to realize that a PAYGO system is unsustainable and leaves SS contributions very susceptible to small changes in population and productivity growth. The simple solution is to implement what we call “risk sharing through a common portfolio.” Because of continued inaction in Washington year after year (and squandered surpluses), there is a cost to be borne and it is currently a 1.1% permanent increase in SS taxes for all citizens – the worse part, if we keep delaying, the cost keeps rising as this is a ticking time bomb, but the fuse is long so Washington can kick the ball down the road to the next set of representatives!

The sad part is Congress is totally paralyzed (I tried contacting my rep, Congressman Rush Holt, when I lived in NJ and he claimed he did not have the time to meet and I was fobbed off onto a researcher). Someday, I hope that our elected representatives get a backbone to take this on and not strap our kids with a ridiculous tab for our inaction.

In addition to having a decent health care system, shouldn’t we ensure that we do not leave our retirees in poverty or plunder from our children to prevent such an outcome?