Social Security is a Monopoly Provider.
It's time to shake up the Social Security system. As I argue in the Detroit News today, it's a monopolistic system. The essay is printed below:

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Government policy has long called for punishing monopolies real (the old AT+T) and alleged (Microsoft). Large corporate deals, such as the proposed purchase of Gillette by (Proctor & Gamble ), are subject to regulatory review. Government oversight, the theory goes, is required to make sure that public welfare is not unduly harmed by a reduction in consumer choice.

One monopoly draws little attention, though it is the biggest monopoly of all. Its product is retirement funding. Nearly everyone who works for income must do business with this monopolistic organization. Talk about market power!

The monopoly? The Social Security system. It extracts 15 percent of everybody's paycheck (those "employer" contributions are really your money, you know). The result: many people have little money left to take to anybody else for retirement planning. For them, they have one choice, and that one choice is Social Security.

By law, you must "purchase" (through taxes) the "services" (retirement funding) of this provider. Further, you have no choice in how your money is "invested," unlike, say, at a bank, where you can at least choose between a checking account and a savings account. Want to put some of your retirement funds into the greatest stock market known in human history? Fat chance. Real estate? Dream on. How about something boring and safe, like U.S. Treasury bonds? Nope. It's like that TV commercial for the credit card company. The answer is always NO.

Your money will be taken from you and given to someone else. (Some of it will be diverted for overhead.) after some money for overhead. Will you get "your" money back? Only if you live long enough. And only if the politicians don't break their promises by the time you have reached retirement age.

Social Security, with a "customer base" that would in normal circumstances bring the curiosity, if not the wrath, of federal regulators, has long needed shaking up. Enabling individuals to use personal accounts is a timid but necessary first step in that direction.

After all, it's your money. (permalink)