Bush Touts Ohio Privatization Plan With 1.86% Return
Bush has been using Ohio’s retirement system as a model for privatization, e.g. here at an Ohio roundtable discussion on April 15. However, the facts make it difficult to use Ohio's system as a model of privatization for the nation. From The Los Angeles Times:
Bush Points to a Retirement System With Mixed Results
By Peter G. Gosselin and Edwin Chen
Times Staff Writers
April 16, 2005
KIRTLAND, Ohio — President Bush came to Ohio on Friday to highlight a state retirement savings system that he said showed that Americans would be better off handling their own old-age investments through personal accounts…But that state's version of personal accounts has attracted few takers … And records show … a five-year earning record of 1.86%, about the same return that the president says Social Security produces.
"Boy, does he have a hard sell ahead of him in using Ohio as his example," said Keith Brainard, research director of the National Assn. of State Retirement Directors, which represents virtually all of the nation's public employee pension plans.
"Ohio's individual account programs are only a few years old, and in the short time they've been around, investment returns have been relatively weak." Brainard said…
…The OPERS "aggressive" portfolio had a five-year return of 0.26%...
By contrast, the fund that pays for the system's traditional pensions, which is handled by professional money managers, had a five-year return of 3.52%.
And, as the article notes:
...the president's cause was unlikely to be helped by a stock market that wrapped up its worst week in two years Friday, with the Dow Jones industrial average diving 191 points. The Dow slumped 3.6% for the week, and the tech-heavy Nasdaq index fell nearly 5%...
Thus, the administration's model plan is one that has paid a 1.86% return and does nothing whatsoever to deal with the insolvency issue the administration claims is such a big problem.
Negative returns after the 2% or 3% clawback, and no effect at all on solvency. That's the plan they're selling.
Posted by Mark Thoma on Sunday, April 17, 2005 at 08:01 AM in Economics, Social Security |
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