Another lesson your government could learn from ours

So with all this talk about Social Security going bankrupt, the current path not being able to sustain itself for much longer, it got me into researching the Canadian version, known as Canada Pension Plan, or CPP.

Current status?

Sounds awesome, right? Well it wasn't always like that.

Sounds a lot like Social Security, right?

So what did we do?

Interesting, eh?

What is also interesting is that the Quebec Pension Plan is going bankrupt. Turns out those damn frenchies took money from their pension plan and invested it into industrial policy. Just a stupid, stupid plan, and now the fund won't be able to sustain itself at the 9% contribution rate.

What did the rest of Canada do with our funds?

Rate of return is a bit unexciting. Always lower than stock market, but always steady as well, and unaffected by the recession.

Just another example of the Canadian Government making smart decisions with our future.

Soon enough we'll be taking over the world.

The silence is almost palpable...

the silence about? The Canadians doing the VERY think that the American left screamed about when Bush (and others before him) proposed it?

yes, it was conjoined with a rate increase, but my guess is the right wing would happily sign off on a rate increase - since increases will come anyway - in order to get the investment structure.

Not sure what comment you are waiting on.

Interesting guess, but hard to substantiate.

So is the money diverted from government assets invested by the individual or by a panel on behalf of the individual?

The article you cite makes it seem like the monies are still collected by the government but it's not the individual but a government panel that invests that money.

I think that might be a key difference between what is being done in Canada and what has been proposed here before. As I understand it, the goal of Social Security privatization in the US has been to move the money into some place where the individual can invest the money as they wish. The only problem with this is that it has been tried before in places like Chile and the UK and has resulted in disaster.

This might be an important distinction in just how private these funds actually are.

I would suggest it's FAR more likely than that the left would sign off on the investment structure.

But then, when speaking of hypotheticals, who can prove their claim?

It was not my impression that private control was a blank check. The key to that was specific accounts - i.e. what YOU paid in was YOUR money, not a contribution to the pool.

To the extent that it was YOUR money then you should be able to see the rate of return on what was invested on your behalf.

My understanding was that your control of the sort of investment was only in choosing among a very narrow menu of very safe choices. And that geared to your age relative to your retirement.

But there wasn't going to be a high-risk option.

Interestingly enough, this was the topic of Obama's Weekly Address for this week.

Good Job Nova.

You gave her an out and she took it.

She completely ignored the part where Bush proposed taking Social Security away from the government.

If that had been done from the start of the program and the money collected for Social security had stayed in the system instead of being spent by Congress we would have zero problems right now.

Bullshit. anyone living off SS benefits is hell and gone from "middle class" and until you are drawing, it does nothing for you but reduce your income.

Those who have retired - those who have yet to? A much more dubious claim. and even those who have, "dignity" is a pretty fuzzy concept - just ask Para about that right now.

Naturally.

'Cause he's a fuck up.

I remember how much you bitched and whined when Bush advanced a similar plan a couple years ago.

I would rather not pay more into social security because I am having a hard enough time budgeting for my own retirement plan. Don't even try to convince me that increasing the amount going into SS would mean I don't have to have a retirement plan. It's bullcrap.

Anyone else a bit disturbed the government takes the money and invests it in stocks of private companies? (I know it's through an investment house, but same difference.) It's potentially a huge conflict of interest at best, and communism at worst.

Now don't get me wrong - it's great the Canadian pension fund will be able to support all those old fogies. But this gives them much more incentive to see that one company succeeds over another. Government and big business really should not mix.

IIRC, Social Security has nearly $2 Trillion in reserve to prevent such a thing from happening.

People say it's going bankrupt because Congress "raids" the fund, but issues bonds to cover whatever they take. Now, you might scoff at that, but we've never defaulted on a bond, and if we did, you'd better believe we've got bigger problems than pension checks bouncing.

Watch and see if the responses to this post are all gripes about the deficit.

Stop.

Go directly to jail. Do not pass Go, do not collect $200.

This is 30 years away and can be avoided entirely by very minor tax increases. Social Security in the US is not in crisis, and those who pretend that it is are just looking for an excuse to dismantle it and (to some extent) write off the borrowing that has been done against it.

In particular, reversion to a model where each individual has their own "account" rather than there being a collective pool defeats the entire purpose of such a program - which is to ensure that everyone has enough retirement income.

SS could
be fixed today. Here is the problem, most working class people are mandated to pay 7.5% of their wages in to the SS system, but once you make over 100K you reach a cap and no longer have to pay it. What that means is that billionaires only pay $7,500 a year into the SS system the same as someone making 100K.
The answer, eliminate the cap and everyone pays 7.5% of their income into the SS system no matter how much they make.
See there is a fallacy here. The highest tax bracket for the rich is 35% but they don't pay SS on most of their money so they are really paying 7.5% less tax than the working class, so their bracket for federal taxes is 27.5% in reality which is right about what the working class is paying.

Money is collected by the government, but managed by an independent group. Investments and stuff like that are all managed by the independent group.

Is it private? Hell no. Should it be? Not if the government can run it properly.

Couple of key points. CPP funds cannot be touched by the government. And provinces are allowed to run their own funds alongside private pension plans.

My grandparents are collecting old age security, CPP, APP, RRSP, as well as money from their investments.

Makes out for a tidy check that will easily pay it they need to go into a old folks home.

Like I pointed out in the OP, Quebec did something similar, and now their pension plan is going bankrupt.

Any pension plan should be completely sealed off from any government hick drawing money from it. I don't care what state the economy is in.

I disagree. Public pension plans will be a part of any federal or state government. In order to get maximum return for the money, the state will HAVE to invest it. Key is to get this as far away from the government as possible.

Here in Alberta we have the Heritage Fund. Because of our oil revenues, we have billions of dollars lying around. The government would be extremely unwise to not invest it.

You missed the point.

Drawing money from the SS fund to pay for excursions in Iraq/Afghanistan or for pork in California isn't going to end well. This needs to stop.

And secondly, like EP said, there is a cap. Contributions need to be equal across the board. If you want to draw from SS, you pay the 7.5% regardless of how much money you make. This is essential to the fund surviving.

Taking out the cap for people earning over $100,000 would easily fix SS problems. Creating a law that prohibits Congress from dipping into the fund would ensure that SS stays viable for a long time.

Ya know, there's a funny thing that all those who have ever defaulted on their first bond have in common - they had never done it before.

Past performance is not a guarantee of future returns.

I agree the government needs to invest it. I'm just sayin' them putting it into private company stocks is a huge conflict of interest.

Say you own Road Company X. And your friend owns Road Company Y. The government wants to build a billion dollar road. On one hand, if they give the contract to you they gain nothing. But if they give the contract to your friend, Road Company Y gets a lot of money, their stock becomes more desirable, it rises, and the government can then cash out and make a lot of profit from flipping the shares.

Even if you had been able to build a better road, or be able to build it cheaper, there is a lot more incentive for the government to award the contract to the company they've invested in.

I realize that. And that is exactly why you need an independent board to look after the investments, and make sure they can be investigated by the public, or even by the government.

But it pays out as if you had your own account anyway.

We get a notice every year updating us on what we've paid in and what we can be expected to draw. the latter is based on the former, just as if it was our own account.

My wife, who's paid in less than a thousand dollars over her lifetime gets one too.

Do you know what she can anticipate drawing (on her own "account", not on mine)?

That would be a big fat nothing.

So how exactly is the pool providing that she has a retirement income (save that whatever benefit, if any, it would let her benefit from having been married to me)?

I agree, I'm just pointing out that it's not bankrupt.

Funny, I can't find anything in the Constitution enumerating to the FedGov the power or responsibility to take care of everyone in their retirement and/or dotage.

Totally different cup of tea Marso.

SS already exists. You have 2 trillion dollars tied up in it. Now either you can abolish it and give everyone their money back, or you can figure out how to make it work.

People who play poker are familiar with this concept. It's called, "don't throw good money after bad".