S&P 500 Down 14% Since Bush Took Office -- So Much For Social Security Privatization

Today, the stock market took another major tumble, with the Dow Jones dropping 450 points (more than a 4 percent drop).

But much more importantly is the fact that the broader market (S&P 500) fell 57 points to 1,156 (almost a 5 percent drop). I say "more importantly" because one of the most popular 401(k) investments are index funds that track the S&P 500.

On the day that President Bush took office in 2001, the S&P 500 stood at 1,342.54, meaning that it has dropped 14 percent during his tenure.

Now realize that if Social Security privatization was in effect when Bush was sworn-in, those retirees who invested in the broader market would have seen their Social Security nest egg down 14 percent over those seven-plus years. Instead, they've seen an overall 12 percent increase on their Social Security benefits during that same time frame, thanks to annual COLA increases.

John McCain (R) is for Social Security privatization. Barack Obama (D) is against it.

Enough said.

Mark Nickolas is the Managing Editor of Political Base, and this story was from his original post, "S&P 500 Down 14% Since Bush Took Office -- So Much For Social Security Privatization"

Comments

[ConcernedGuy]

Mark Nickolas' analysis does not include dividends. It's a big omission and when you factor in the income part of the equation, the S&P 500 is flat over the time period he is looking at.

[charon]

I've been told a rising tide lifts all boats. Other hand I've heard it said, a whirlpool sucks everything down with it.

Could there be a massive readjustment of the economy based on the fact that China is the dominant producer of the world's goods since our loyal billionaires shipped our jobs there, seeking a lower labor-cost market so they could raise profits? By lowering tariffs, with low oil prices, and favorable tax policies the neocons paved the way for the exportation of jobs, which shrunk the underlying base of our economy. Could the situation be shakier than we realize?

Let's hope Social Security is never put in the stock market.

[ProudLiberalDan]

SInce 1934, more Republicans have gone down to defeat over the Social Security issue than any other issue. It is a sleeper issue and the Obama campaign doesn't have to any "mudslinging" here. All they have to do is tell the truth about McCain's record.

More than the Keating 5, it is McCain's support for Social Security privatization and his recent comments about Social Security being a disgrace which should be played in Florida from now until the election.

There are two issues that can carry Floriday -- Social Security and pointing out that McCain/Palin would use the power of the government to force women who have been tragically raped or incested to have to carry those pregnancies to term.

In 1996, Florida went from a narrow Bush Sr. win in 1992 to a six point Clinton win in 1996 because of the Social Security / Medicare issue.

Wake up this sleeper! The conservative movement and the Republican Party need to be held accountable and punished for trying to destroy Social Security and Medicare anyway.

They wish to destroy these programs not because they don't work, but because they DO work and it disproves their anti-government, low taxes for the wealthy, ideology.

[GhiaccioPronto]

Don't look now but SS fund has already in effect been privatized to bail out wall street

[reggie1298]

There is currently no money in the Social Security Trust Fund. The evil Bush administration? No, there has NEVER been any money in the SSTF. It's all UOUs (that's you owe you). Some "Lawk Box", huh?
Social Security is not an "investment". It is a Ponzi scheme providing politicians an easy source of cash.

If you are retiring on nothing but SS - good luck.

http://www.heritage.org/research/socialsecurity/em940.cfm

[zjr909]

One thing people tend to forget about Social Security: you get a 100% return on your money without even lifting a finger. It's called "matching employer contribution." Show me one single stock investment where anyone matches you dollar for dollar and I'll be all over it.

[reggie1298]

If the employer paid that money directly to you or put it in an account you owned your comment would be accurate. The employer match, however, is sent to current Social Security beneficiaries. If there is money left over, big government spends it and sticks an UOU in the Social Security Trust Fund.

Now, when you start receiving SS benefits you may do better or worse, depending on how long you live, but when you die, the benefits end. You will have earned somewhere between 1.5% and 2% on the money JUST YOU "invested" in SS. The return on the total money invested in your name will be half of that or 0.75% - 1.00%.

I will guarantee you that ANY well conceived, long term retirement investment will beat that performance in spades.

[Herrington]

Social Security is actually a pretty good deal. If a person making the median wage saved an amount equal to his yearly social security, $3,380, after 40 years at 3% interest he would have $142,000. If he then started withdrawing money in equal payments spread over his remaining lifetime, say 30 years, he could withdraw about $355 a month. By contrast the benefit accrued from paying the same amount in Social Security will entitle him to $937 a month. How do they do that? They do it by absorbing the risk of tens of millions of people. Most people won"t live 30 years after retirement, but no one person can behave as if he won"t. This is the largely unsung beauty of Social Security, it is a giant lottery that you win by living longer than anyone else.

The other beauty is this, Social Security is not a personal asset. If a person has a catastrophe an all his assets are consumed to pay for it, Social Security remains intact. It keeps coming while your savings would be wiped out. There is no annuity or life insurance policy that can provide that kind of safety net.

[Capncuster]

On the up-side, the loss is only 2% per year. So it would take you half a century to lose it all. Also, given the economic team the Repubs have had in place for the past 7 years, it's a miracle the losses weren't bigger.

[reggie1298]

Again, ignores dividends and reinvestment! Again the beats inflation, unlike SS.

Geez!

[Herrington]

COLA assures SS payments are not erroded by inflation, that is if you believe the CPI, which it appears you do since you are citing everywhere.

[jacqmac]

There's a whole lot of truth to the bumpersticker I've seen that says 'Don't GAMBLE with MY Social Security." The FLAW in the whole 'Privatization wouldn't be a bad thing if it were a superannuated fund like in Australia or Great Britain" scheme is that IT WOULDN'T BE ANYTHING LIKE AUSTRALIA OR GREAT BRITAIN! Bush was PUSHING this scheme and was actually telling WHOLE GROUPS of people that 'the government could be trusted to INVEST THE MONEY FOR YOU." THAT WOULD have been FINE-BUT THE GOVERNMENT was also suggesting that the INVESTMENT would be in STOCKS. Judging from the ability of the GOVERNMENT to choose stocks-NEXT TO ZIP-based on an UNREGULATED MARKET-I'm VERY GLAD that this plan is 'off the table.' By the way, check out your local Gambler's Anonymous meetings for 'former stockbrokers'---you'd get a real good idea of how they got there!

[Viper]

The DOW Jones is also upwardly adjusted. When a company does real bad, such as ENRON, Worldcom or now AIG...its replaced thus bringing the average up.

Regards

[Viper]

In real constant buying power dollars its down by 60%.

Wallstreet got everthing it wanted from McBush and its bad for them... at least those that still need to make a living in what is left.

And yet they keep sticking with the same old laisez faire policies that have never worked... Same ole free trade crap that no one else in the world does.

Regards

[reggie1298]

"In real constant buying power dollars its down by 60%. "

People with real numbers provide sources.

[Herrington]

The CPI has been under reported for thirty years. So much so that it is widely considered a joke. To wade through the labrynth of weightings and adjustments like substitution devolves, quickly, into a discussiion about why these techniques are used. Suffice to say that the "market basket of goods and services" changes based on the political goals of the Executive branch. Low inflation translates to higher GDP when adjusted by a bogus inflation number. The CPI is not a reliable indicator, it has become a bromide.

[reggie1298]

Mark,

Much like your Florida recount effort, your simplistic assembly of raw numbers for the S&P 500 ignores some key investment factors.
Let's take the Vanguard 500 Index Fund (VFINX) as an example of a popular index fund. Because the "500" in the name stands for the 500 evil, for-profit corporations that comprise the index, dividends were paid to and reinvested for the investors. In fact, although the price of the fund was 17% lower today than on January 22, 2001, an investor made around 18% over the period - not good, but not as bad as you state. In fact, it beats Social Security by 50%.

All this happened in spite of the Clinton recession, 9/11, and the mortgage/credit meltdown.

These numbers are approximate. You may roll your own at:

http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=VFINX

This just takes care of your investment return "information", I'll get to the Social Security question on Thursday.

[MajorKong]

I still have stock from the tech firm I used to work for that's worth about 10 cents on the dollar.

[reggie1298]

That was a very poor investments, wasn't it?

The three basic rules of investing are:

1.) Diversify your investments over market sectors and companies
2.) Invest for the long haul - don't change your strategy
3.) Keep investment expenses low

Now can *you* see which of these you didn't do? Bad, bad Kong!

[Herrington]

"it beats Social Security by 50%"

What a laugh. Even if inflation, which has been underreported for three decades now, is not considered, and it is apparently not in either your or Nickolas" assessment, then the loss of 14% of your capital is not offset favorably in a comparison to Social Security by an 18% return on the investment.

First, you have netted 4% in 8 years. Second, your investment earnings going forward are based on less assets and therefore will be less.

Finally, and most glaringly obvious, is that 12% increases in Social Security payments does not equate to a net of 18% return. It is 12% growth in Social Security payments over and above the nominal interest on your investment in Social Security. The 12% was, for the sake of argument, gravy over and above the interest you already received on your original investment.

If you want to engage in a discussion about the merits of market vs. Social Security you will lose. There is much more to it even than quarterly returns. Social Security is backed by the labor or your neighbors and private investments are backed by the full faith and credit of Wall Street CEOs.

[reggie1298]

Oh, Herrington, you want me to be a mathematical wet nurse?

I didn't mention 14% anywhere. If you had $13,200 in VFINX in January, 2001, and added no more money to the account, you would have had $15,600 yesterday. That is an increase of 18%.

Actually comparing an investment to SS is ridiculous, since SS is not an investment.

Your final paragraph is the topper, though. Where does my neighbor labor? Why, at the same types of companies whose stocks are sold on the market. If those companies go bust, guess what - my neighbor has no job.

Just for fun, try this:

http://politicalcalculations.blogspot.com/2007/01/approximating-social-securitys-rate-of.html

No matter what numbers you enter, the return can be beat by a well-structured, long-term retirement investment - including stocks!

[mamacat]

Factor in rampant inflation during the Bush failed presidency, and one would still have a signifigant net loss, not a gain.

Social Security loses, again, because of the free falling value of the dollar under the Republicans.

The Clinton recession? The one that happened long after he left office? Nice try.

[reggie1298]

When it comes to information that can be quantified, liberals cannot play the game as usual. By usual I mean slap some garbage out there and see if it sticks.

The following numbers are average annual inflation numbers, check them at:

http://inflationdata.com/inflation/Consumer_Price_Index/HistoricalCPI.aspx?rsCPI_currentPage=0

Rampant inflation during the failed Bush presidency (2001 - 2007) - 2.82%
Reasonable inflation during the halcyon days of Clinton (1993 - 2000) - 2.77%

Clinton recession:
On Nov. 26, 2001, the news media announced the United States was officially in a recession and had been since March of that year. (http://www.howstuffworks.com/recession.htm)
GWB, as incompetent as he is, managed to put the country into a recession in ONE MONTH? Nice try, indeed!

[SteveMDFP]

The bank de-regulation that made this crash possible was the "Gramm-Leach-Bliley Act." As in Phil Gramm. This sailed through the Republican congress, with McCain voting for it, while Biden voted against it.
http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00105

McCain, along with 53 other senators, is directly responsible for this mess. His 1/54th share of the loss of value in the equities market comes to many BILLIONS of dollars.

Rich people have every reason to be scared of McCain. Poor people, too. The whole country could go to a financial hell in a handbasket under a McCain administration.

[LeftRight]

Not to mention that 14% is actually an UNDERSTATEMENT since there has been quite a bit of inflation since 2001.....

[cgilbert]

Why isn't Obama running an ad reminding people that McCain and his crowd would have had our SS money in the market?!?

[leftLibertarian]

Is Obama for or against all these bailouts?

[ajax2]

When you adjust for the Bush Dollar it's much worse than -14%.

[FrictionSoul]

The way I see it is that the "bail out" - it didn't bail anyone out, that's for sure - is going to be funded by SS, so in fact they just privatized it as of today.

By Friday we should see a run on the commercial banks.

[optech007]

You do realize that Congress spends the money in the SS trust fund, so 100% of the money you paid to SS is gone. About half of the national debt is owed to the trust fund. Now, they say you will get your benefits when you retire but if Congress didn't have the money to pay for whatever when they borrowed it from Social Security, where will they get the money to pay it back?

[vippy]

The same place they get the money for the wars and the bailouts!!!! Where else?