8/20: "Should Social Security be privatized?"-Incheon Airport to Be Put on Sale

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Great Social Security Debate on CNBC youtube.com8분 - 2010년 8월 7일 - 업로더: InsideScoop Should social security be phased out and all the money placed in a retirement plan like an IRA or a 401k? If social security ...

Pro & Con Arguments: "Should Social Security be privatized?"

PRO Privatized Social Security When Social Security began in 1935, the contributions of 17 workers paid for the benefits of one retiree. In 2035 the estimated ratio will be 2.1 workers per beneficiary. Allowing individuals to contribute to their own private accounts may reduce future loss of money from fewer worker contributions. [3] Using the existing system to avert the pending collapse of Social Security will require deep cuts in benefits, heavy borrowing, or substantial tax hikes. A better solution is to switch to private investment accounts that will be funded with existing payroll tax thereby avoiding any benefit cuts or tax hikes. A medium income worker born after 1965 can expect less than a 2% rate of return with the existing Social Security system. Privatizing Social Security will put more money in the pockets of retirees. Over the last 80 years, private investment in the US has earned an average return of nearly 8%. [4] Private retirement accounts will give a worker contractual rights to retirement benefits, a right missing from the current Social Security system. In the 1960 US Supreme Court case Flemming v. Nestor, a retiring legal immigrant eligible for Social Security benefits, who paid into the system for 19 years, was denied his Social Security retirement money after being deported as a member of the Communist Party. Putting Social Security into private accounts does not expose retirement money to risk. These federally regulated personal accounts would allow individuals to invest only in diversified, approved mutual funds and not in single stocks or highly volatile stocks. Switching to personal retirement accounts would not result in burdensome transaction costs since the year-over-year growth rate over time of these investments will offset any extra costs the accounts incur. In the past, budget surpluses in Social Security were used by the federal government to fund other government spending. Keeping retirement money in private accounts will prevent it from being diverted for non-Social Security purposes. [5] Privatizing Social Security into individual investment accounts would boost economic growth by injecting money back into America's failing financial system. Removing the requirement of the federal government to provide retirement benefits reduces the bloated bureaucracy of the US government. The maximum Social Security tax in 1935 was $60; as of 2009 it is $11,000. Privatizing Social Security will alleviate this excessive taxation since private accounts will be taxed through the normal process of income taxation. Given the pending crisis, many young workers assume they will never see the money they are putting into the current Social Security program. Private accounts will be a transparent system that is more accurate an account of the relationship between today's earnings and future benefits. Privatizing Social Security would empower individuals to have control over their own retirement investment decisions, taking the US government out of citizens' financial retirement decisions. Social Security was established at a time when people had a shorter life expectancy. The only viable option for a population that is living longer is to put Social Security into personal investment accounts. The present Social Security system fails workers who have a disproportionately shorter life expectancy rate since they cannot collect on benefits paid. Personal accounts will provide the option to bequeath assets to heirs upon death, an option currently missing from Social Security.

CON Privatized Social Security Moving Social Security into private accounts would cause substantial reductions in traditional Social Security benefits. Privatization would, over the next 47 years, reduce benefit levels by as much as 44% below 2005 levels. [6] Getting a privatization system started is too costly. The transition costs of setting up new personal accounts while continuing to provide benefits to Social Security's current beneficiaries would require an extra $1 trillion to $2 trillion. [7] Private accounts would reduce special insurance protections, such as disability and survivor's insurance, that are also provided by Social Security. Cuts will have to be made to these programs in order to fund private retirement accounts. Privatizing Social Security, which essentially is putting peoples' retirement money at the whim of the stock market, will weaken the federal retirement system through potentially risky investments. Putting their Social Security funds into private investing accounts exposes US workers to be victims of unscrupulous stock brokers and of their own investment choices. Many people either do not know, or do not want to know, how to make the sound decisions about their own long-term investments that private accounts require. The upfront costs of setting up the individual accounts and of advising individuals of the system would take away any fiscal benefits that moving toward privatization could bring. Social Security is a program that provides benefits through one, centralized process dictated by the US government. Moving benefits into individual private accounts creates a decentralized system that will have to take into account the millions of diverse opinions, preferences, and expectations of individual investors, making the program too bureaucratic and unwieldy. Privatization of federal retirement benefits has proved disappointing in other countries. Private retirement accounts in the UK that started in 1988 have had management fees and marketing costs eat up an average of 43% of the return on their investments. [7] Putting money from Social Security into private accounts means moving retirement savings from a simple, easy to comprehend system into a complex structure of investment portfolios and stock market shares that is more difficult to understand. Invested private Social Security accounts will not benefit the US economy but will put billions of dollars in brokerage and management fees into the pockets of Wall Street financial services corporations. Instead of upsetting the system through a new plan like privatization, future budget shortfalls can be fixed within the system. The current system will work by reducing benefits, increasing taxes, and/or raising the retirement age. Social Security paid benefits to over 39 million retired workers in 2008. Creating and managing this many individual private retirement accounts would generate more, not less, bureaucracy. This enterprise would require costly hiring and training tens of thousands of new government employees. [8] [9] Because private accounts would be financed by taking money out of Social Security, privatization would increase Social Security's funding gap and move forward the date of the system's insolvency up from 2037 up to 2030. Social Security taxes are weighted to balance the system for all levels of wage earners. Private accounts will create disproportionate returns since higher-wage will have more money to take bigger risks for higher yield investments than can low- and moderate-income workers.

http://socialsecurity.procon.org/#pro_con

Incheon airport privatization stirs debate

[NEWS IN FOCUS] Critics say move could lead to deteriorating standards

October 06, 2010

The controversy over the government’s decision to sell a controlling stake in Incheon International Airport is heating up after a local current affairs program aired an in-depth report criticizing the privatization plan, leading to an online protest by thousands of Internet users.

The government announced last week as part of its budget proposal to sell a 49 percent stake in the airport operator next year.

Incheon International Airport Corporation is assessing the share value and sales price with investment bank advisers who will manage the initial public offering.

However, an amendment to a related legislation that would authorize the privatization is still pending in the National Assembly after it was introduced last year. A majority of opposition party lawmakers are against the plan.

The Ministry of Strategy and Finance and the Ministry of Land, Transport and Maritime Affairs justify the privatization by arguing that the airport must be supervised by an agency with operating expertise and the ability to attract more financial and capital support so Incheon International Airport can develop further as a leading global airport hub.

A partial privatization would help boost the airport’s development without the need to increase the financial burden on the government.

The government is planning to carry the privatization in two phases, with an initial tranche of 15 percent to be offered by the end of this year and a second tranche of 34 percent next year.

Critics say, however, that the partial privatization of Incheon International Airport would mean the loss of its status as a publicly owned facility and could affect the airport’s service quality and brand image.

Incheon International Airport, which opened in 2001, has been named the world’s best airport by Airports Council International (ACI) for five consecutive years and has received various other global awards.

ACI is a global body whose members include more than 1,700 international airports from 181 countries.

The airport has seen a continuous climb in operating profits and sales each year. In the first half of this year, the airport made 268.8 billion won ($237.7 million) in operating profits on 624.8 billion won of sales.

“Instead of selling its stake to private owners, the government should try offering its expertise on operational success to other overseas markets,” said an industry official. “It will be a pity to see the world-class airport fall into possible foreign ownership.”

According to Realmeter, one of the nation’s leading research agencies, 56 percent of the public that were surveyed are opposed to the privatization plan, while only 15 percent agreed.

In addition, more than 400,000 Koreans have signed a letter of protest that was circulated by the airport’s labor union.

Critics say several previous airport privatizations have failed to achieve expectations.

London’s Heathrow Airport and Sydney Airport in Australia encountered additional problems after they were privatized, while airlines and passengers complained about higher fees.

Nevertheless, an Incheon International Airport Corp. official said, “Although the timing of the stake sale may be delayed, it will still go ahead.”


By Lee Eun-joo [angie@joongang.co.kr]

Incheon Airport to Be Put on Sale

By Kim Tong-hyung

Since starting operations in 2001, Incheon International Airport has established itself among Asia's most popular gateways, well-reviewed by travelers for its spacious environment, navigational ease and breadth of retail and dining options.

So critics are questioning why the government seems so eager to move the airport on, even at the risk of selling low.

As part of its plans to advance state-run enterprises, the Lee Myung-bak government is moving to privatize the Incheon hub by putting up for sale 49 percent of its stake.

However, opposition lawmakers are concerned that the government, desperate for quick money to reduce its massive budget deficit, is showing a willingness to accept 50 cents on the dollar for the country's most profitable airport.

In announcing its budget for next year, the Ministry of Land, Transport and Maritime Affairs said it expects to earn around 590.9 billion won (about $504 million) by selling a portion of its shares in the airport.

Answering Democratic Party lawmaker Cho Jeong-sik during the recent National Assembly audit, ministry officials said that the figure accounts for 16.3 percent of the stake, priced at 5,000 won per share.

The revelation caused a stir as critics insist that the airport could be worth a lot more.

"Expecting to get 590.9 billion won from selling 16 percent of the airport, which accounts for one-third of the 49-percent stake put up for grabs, means that the government is claiming the airport to be worth just around 3.5 trillion won," Cho said.

"This is even lower than Incheon Airport's book value of 4.1 trillion won, and not even half of the 7.7 trillion won the airport is worth when combing net asset value with officially assessed land prices," he said, claiming that the airport's stocks should be worth around 10,610 won per share when factoring in land prices.

The transportation ministry said that the 590.9 billion won was merely an "estimated" number, based on a calculation by the Ministry of Strategy and Finance in predicting next year's fiscal income.

"The actual sales price will be dependent on the timing and method of the sale, as well as the amount of shares traded. We can ensure that the shares will not be sold at a lower price than their face value," said a ministry official.

However, Cho claims that the government's logic for privatizing the airport, which was to improve its competiveness and secure investment for a 9 trillion won redevelopment plan that continues through 2015, is looking increasingly less convincing.

"The claims about competiveness and securing investment for the three-phase redevelopment plan are being exposed as lies," Cho said.

"After cutting taxes on high-income households and blowing an enormous amount of money to renew the country's four major rivers, the government is desperately trying to sell the airport to help mend its massive budget hole."

Although the government has been eager to privatize poorly managed state-run enterprises to improve their competiveness, there have been debates over whether the airport qualifies as one of them.

Incheon Airport saw its net income increase to 207.1 billion won in 2007 from 123.9 billion won in 2005, as it continues to grow as one of the world's largest and busiest hubs.

Since 2005, it has been consecutively rated as the best airport in the world by the Airports Council International, and received the full 5-star ranking by Skytrax, a recognition shared only by the Hong Kong International Airport and Singapore's Changi Airport.

thkim@koreatimes.co.kr