She was 21 (and already saving for retirement!) when I left Galveston
Reader Russ Dewey sends in this Chicago Tribune story about the "Galveston plan," in which three Texas counties withdrew from Social Security in 1981, and transferred the retirement taxes of county employees into private retirement accounts. Results:
The bad news is that the verdict is decidedly inconclusive. No one here can agree whether county retirees are better off than they would have been had they stayed with the Social Security system--a dilemma that precisely mirrors the emerging complexities of the national Social Security debate.
"I didn't come out ahead," said Evelyn Robison, who was the Galveston District Court clerk for 13 years before her retirement in 2004. "My chief deputy did not come out ahead. My bookkeeper did not come out ahead. I personally don't know anyone who has retired who came out ahead."
Nonsense, countered Rick Gornto, a Houston financial manager who designed the alternate retirement plans for Galveston, Brazoria and Matagorda Counties and still runs them.
"In every case we ever looked at, people end up better off in our plan," said Gornto, president of First Financial Benefits.
It's probably inevitable that this will be looked at as a test case for Social Security privatization, and that is probably a shame. For one, a bunch of public-tit lifers don't exactly make an ideal data set for how all American workers will handle their own investments. For another, these people were not allowed to put any of their money into stocks: The plan limited them to dull stuff like bank notes and annuities (making it, as far as I can tell, a mirror of the conservative way Social Security invests its "trust fund" in the first place). You'd have to be an absolute genius to have been in the stock market since 1981 and not be substantially ahead of whatever Social Security would provide.
But most seriously, if we're going to measure the worthiness of Social Security privatization by the degree to which a positive result can be guaranteed for all, the whole idea will never get off the ground. It's true: If you let people invest according to their own lights, some will do better than others, and some won't do well at all. (I'm not being callous toward those people who don't make out: I have an uncanny ability to turn a dollar into a dime whenever I invest, so I'm nobody to scoff.) The mixed results of this experiment neither prove nor disprove the wisdom of privatizing; they're what we should be expecting, and are also a strong argument for expanding, not contracting, the range of options you have for investing your own money.
