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Following Up: The Chilean Pension System

Friday, September 09, 2011

Herman Cain, candidate for the Republican presidential nomination, touted the Chilean model of social security in this week's debate. The man who designed and implemented that model, José Piñera, former Chilean Secretary of Labor and Social Security, president of the International Center for Pension Reform, and distinguished senior fellow at the Cato Institute, explains the Chilean model for social security and how it might work in the United States. 

Guests:

José Piñera
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Comments [20]

Phil Huling

Krugman's take "Buying into Failure" Dec 17, 2004-NYTimes, is the balanced and fair follow up show. Brian please, the extremists have now had their say. Please enlighten us with a little perspective, rather than giving Jose Pinera free rein. You've further polluted the discourse if you leave the topic as is.

Herman Cain is not so entertaining just now and Dorothy from Manhattan is spot on.

Sep. 09 2011 06:13 PM
gary from queens

And did you say governments pay their bills?! if that were the case, we wouldnt be having this discussion!

Central command economies failed in russia and china. it's the hallmark of the cuban failure. they could grow those economies.

Greece is another example of a social democracy Obama loves. Is that the fate you're hoping for?

The UK and germany got the message and are reversing course to some extent. But not obama

Sep. 09 2011 01:34 PM
gary from queens

@RBC from NYC

Profits are the best measure for a company to know it is filling a demand and doing it well. God bless profits. profits is what leads to jobs BTW. not government.

Government wastes more money in overhead than private companies make in profits. those profits are given to shareholders like you and me, and is reinvested into it's own overhead and operations that run the company.

Learn about high risk pools. it's what allows high risk drivers, for example, to obtain car insurance.

So yes, government takes all comers, and so does private insurers. At least until Obama takes over that industry like he took over student college loans.

Sep. 09 2011 01:08 PM
RBC from NYC

Gary from Queens:

The government & insurance companies balance their books all the time... its called basic accounting.

What insurance companies do that the government does not is make profit. Government is a not-for-profit entity. Insurance companies are for-profit entities (for the most part). Also, the government is not a public company and doesn't have stock that is traded on an exchange like most insurance companies. Also insurance companies can pick and choose who they are going to do business with. The government serves all.

Sep. 09 2011 12:00 PM
jgarbuz from Queens

The economy of Chile came from a very low base to become the best economy in Latin America over the last 30 years. Same as China and other former "third world" economies which began to grow very rapidly when they introduced raw capitalism into their economies.

However , that alone does not prove anything for the future. There are no prophets today, and nobod can accurately predict the future. I'm about the closest versus anyone I know in that regard :)

Sep. 09 2011 11:54 AM
Richard from Queens

SS is a safety net. We all know that if people are allowed to privatize their FICA withholding, there will be some people who lose all their money and would therefore become destitute without that safety net. What would they do then? Each year I put the maximum amount away into my 401K account, but I still like the idea of having that SS safety net as part of the total retirement package.

Sep. 09 2011 11:51 AM
The Truth from Becky

No gary from queens, rick perry is NOT right because I am certain I have paid in $300k in all the years I have been working and there will probably not be $5000 available for me when I retire....stop drinking the kool aid gary!

Sep. 09 2011 11:51 AM
gary from queens

@Laura from UWS

Insurance companies have to balance their books. The government doesn't. Pols can promise the moon to the public to get their votes, while continuing to borrow or print the money. Until insolvency like Greece.

THAT'S WHY GOVERNMENT IS INHERENTLY ILL SUITED TO ADMINISTER HEALTH OR RETIREMENT PROGRAMS!!

Sep. 09 2011 11:48 AM
Edward from NJ

So his final argument is that this system is good because it's still working after 30 years. Social Security has been working for nearly 80 years so it must be awesome.

Sep. 09 2011 11:48 AM
jgarbuz from Queens

Ultimately, the ability to pay pensions, either by the government or by domestic private businesses listed on stock markets, depends on the growth of the economy. In a growing economy, the gov't can collect more taxes. IN a growing economy, companies have more revenues, and their stock values go up.

But in a stagnant economy, regardless, whether the pension is public or private, what will be paid out will depend the growth of the economy and the growth of the number of pensioners.

Sep. 09 2011 11:46 AM
gregb

You have to save at least 15% over a lifetime to self-fund retirement:

http://www.genuineideas.com/ArticlesIndex/pension.html

but any pension system has to offer a government subsidized floor to make sure the poor or injured or children can survive with dignity. A safety net has to cover everyone.

Sep. 09 2011 11:44 AM
Fabio Carasi from Still in NJ

I found the Krugman "Buying into Failure" Dec 17, 2004

Here is the link

http://www.nytimes.com/2004/12/17/opinion/17krugman.html?scp=2&sq=krugman%20chile&st=cse

Sep. 09 2011 11:44 AM
Allan from Highland Park, NJ

You can save for retirement on your own. Why have social security? The answer is that we feel morally obligated that people who have spent their lives working don't get completely financially wiped out before the end of their lives. Because individual investment accounts can be wiped out, we do not fix the problem with individual investment accounts. Rather, we create some winners, but will still feel the moral draw of funding the losers. So the investment plan fails in the current social security system's attempt to put a floor under everybody.

Sep. 09 2011 11:44 AM
Aaron

What is the employer contribution under this plan? Would it be different than social security on that point?

Sep. 09 2011 11:43 AM
Jim B

How would this be any different from 401Ks, which have lost a great deal of their value since 2008?

Sep. 09 2011 11:43 AM
Dorothy from Manhattan

Wow! Compound interest - 0.5% interest, compounded. Does this program come with a cardboard box I can live in?
More money for the banks to play with, more money for Goldman Sachs.
Geez, this guy's from the Cato Institute. Hardly unbiased. This conversation is on a level with unicorns, little pigs that build houses and wolves who dress up like Grandma.

Sep. 09 2011 11:42 AM
Fabio Carasi from Exiled to NJ from NYC

Paul Krugman in a column at the time of the Bush proposal, took a look at the Chilean system and SHOWED how it was a failure and had to be bailed out by the Government. If I had a bit of time I would search it in the NYTimes database. I am sure it's there. I have no idea what Mr. Pinera is talking about.

Sep. 09 2011 11:42 AM
jake

compounded interest? how many of us lost value in our 401k? just another scam for more fees to fund managers..

Sep. 09 2011 11:41 AM
Laura from UWS

US Social Security works OK.

It's an insurance program, not a pyramid scheme unless you call other insurance programs pyramid schemes, too.

In general, the mainstream media has been doing a thoroughly lousy job in how they report about Social Security.

Sep. 09 2011 11:34 AM
gary from queens

Rick Perry was right on one point. Medicare is indeed a pyramid scheme.

When you pay say, $5,000 into a system over time and then take out 300,000 after you retire, that's a pyramid sheme. You win and the ones that come later will lose.

The Social Security has been raided for all these years, by other federal agencies. Government didn't invest it.

Learn more about pyramid schemes:

http://online.wsj.com/article/SB10001424053111903520204576484173632138048.html?mod=opinion_newsreel

http://www.nationalreview.com/articles/268818/end-medicare-andrew-c-mccarthy

http://www.nationalreview.com/articles/269379/not-entitled-andrew-c-mccarthy

Sep. 09 2011 09:05 AM

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