Anti-privatization arguments

Anti-privatization arguments

The liberal position is typically anti-privatization. Those who have taken an anti-privatization position argue several points (among others), including:

• Privatization does not address Social Security's long-term funding challenges. The program is "pay as you go", meaning current payroll taxes pay for current retirees. Diverting payroll taxes (or other sources of government funds) to fund private accounts would drive enormous deficits and borrowing ("transition costs").
• Privatization converts the program from a "defined benefits" plan to a "defined contribution" plan, subjecting the ultimate payouts to stock or bond market fluctuations;
• Social Security payouts are indexed to wages, which historically have exceeded inflation. As such, Social Security payments are protected from inflation, while private accounts might not be;
• Privatization would represent a windfall for Wall Street financial institutions, who would obtain significant fees for managing private accounts.
• Privatization in the midst of the greatest economic downturn since the Great Depression would have caused households to have lost even more of their assets, had their investments been invested in the U.S. stock market.