The upper class get government handouts just like the poor

originally posted by: coldkidc
Because I don't feel the government is ever the most efficient way to do something...especially when it comes to money.
I think people would see a lot better ROI if there was competition for their money.

The simple refutation of alleged government inefficiency is the existence of natural monopolies. The most efficient way to do a number of things is to eliminate competition and do these things by a government-sanctioned monopolistic company or by the government itself. There are many utilities which operate in this way - the infrastructure costs of competition are impractical and inefficient. Ergo, the government being utterly inefficient is a myth.

What better source than Forbes to speak of returns on investment?

It is plain to see in the preceding chart that the average mutual fund investor has seriously underperformed against a variety of asset classes and has barely exceeded the rate of inflation. The average fixed-income investor has lost to inflation, losing valuable purchasing power. Why does the average investor underperform?

Investors may only have themselves to blame. According to Dalbar’s QAIB, investors make poor investment choices that hurt their investment returns. These decisions, including when to buy and sell, are often driven by emotion.

I rather doubt that people would fare any better investing in new privatized Social Security companies than other investment options.

The simple refutation of alleged government inefficiency is the existence of natural monopolies. The most efficient way to do a number of things is to eliminate competition and do these things by a government-sanctioned monopolistic company or by the government itself. There are many utilities which operate in this way - the infrastructure costs of competition are impractical and inefficient. Ergo, the government being utterly inefficient is a myth.

That's a load of crap...if I was written a check right now for all the money I've paid into the social security I would most definitely be able to get better returns on it than the paltry check they MAY start writing me once I retire at 67 or 69 or 75 or whatever it is by the time I retire.

Socialist drivel...government inefficiency is most definitely not a myth despite your attempt to make it seem so.

a reply to: coldkidc
You can say you are a gifted investor all you want, but Forbes citing that the average investor hasn't done any better than inflation is what - a lie?

You don't buy the fact that natural monopolies exist or are you objecting to government just because it is there?
edit: It's very funny that a capitalist concept is called socialist drivel, by the way.

a reply to: Greven

The socialist drivel I was referring to was the suggestion that eliminating competition somehow streamlines the process...that is most definitely NOT a capitalistic concept

And as far as the comment about the average investor...
I am positive you haven't taken the time to do the math or you wouldn't have even brought it up.

So you think that 2.6%/year is LOUSY?

Let's compare it to the return the government is giving you then...

Will You Get Back Your Social Security Taxes in Retirement?

Consider a single man who earns the average wage throughout his career ($43,100 in 2010 dollars), works every year from age 22 to 64, and then retires at age 65 in 2010. Over his lifetime he has paid $345,000 into the system. But he is likely to get back $72,000 more than that, or $417,000 in Social Security and Medicare payouts, according to recent Urban Institute calculations

Just to give you some perspective - that same $345,000 paid in over 43 years ($8070/year @ 7.5% ss contrib rate) @ the average individual investor return annually of 2.6% would have been $641,178.17 instead of the projected government return of $417,000...

That's about $225,000 left on the table...that's the difference between "making it" & living well during retirement.

All I'm saying is there's a better solution than we have now...the system as it is...is broken.

a reply to: coldkidc
Let me give you a clear example of where the elimination of competition is more efficient: radio. Competition is perfectly fine - as long as no two broadcasters operate too close together. Remember, radio is a spectrum of different frequencies. The problem is that two transmitters operating on/near the same frequency can drown each other out to various extents, leading to interference and a damaged or destroyed product (the broadcast). Thus, inefficiency brought about by competition.

The concept of a natural monopoly is not socialist but rather practical. It exists quite regularly in technology - look at how dominant Microsoft Windows has been across the consumer and business sector in desktops - well in excess of 80% of the market. Other sectors are more competitive - UNIX/Linux are more popular in academia and as servers.

The elimination of competitors is not usually done by force, but rather the cost to enter (or expand in) the market is so steep that few try. Imagine twenty different companies each trying to lay sewage lines to your house. Then another twenty different companies each lay water lines. Then twenty more electrical companies run separate poles and lines to your house, as well. It would be insanity - and that's why it doesn't happen.

Google is breaking into the ISP market because it has so much money and it would benefit them quite a bit. The problem they've had is that private monopolistic companies have created exclusive contracts with existing regulated natural monopolies (power/phone companies) for pole access. Doing without pole access is extremely costly; it still ain't cheap to run lines with pole access, but it's far and a way cheaper than underground.

You should look at the source of that data(pdf):

Single man earning the average wage ($43,500 in 2011 dollars) turns 65 in...
1960 Paid:$18,000 Benefits:$128,000
1980 Paid:$104,000 Benefits:$265,000
2010 Paid:$352,000 Benefits:$432,000
2030 Paid:$485,000 Benefits:$587,000

See some funny things with that?

originally posted by: coldkidc
a reply to: Greven

The socialist drivel I was referring to was the suggestion that eliminating competition somehow streamlines the process...that is most definitely NOT a capitalistic concept

And as far as the comment about the average investor...
I am positive you haven't taken the time to do the math or you wouldn't have even brought it up.

So you think that 2.6%/year is LOUSY?

Let's compare it to the return the government is giving you then...

Will You Get Back Your Social Security Taxes in Retirement?

Consider a single man who earns the average wage throughout his career ($43,100 in 2010 dollars), works every year from age 22 to 64, and then retires at age 65 in 2010. Over his lifetime he has paid $345,000 into the system. But he is likely to get back $72,000 more than that, or $417,000 in Social Security and Medicare payouts, according to recent Urban Institute calculations

Just to give you some perspective - that same $345,000 paid in over 43 years ($8070/year @ 7.5% ss contrib rate) @ the average individual investor return annually of 2.6% would have been $641,178.17 instead of the projected government return of $417,000...

That's about $225,000 left on the table...that's the difference between "making it" & living well during retirement.

All I'm saying is there's a better solution than we have now...the system as it is...is broken.

Exactly. You didn't even bring up the fact that you could pass that wealth on to your children upon your death so that they can have the advantages of starting with some generational wealth.

a reply to: Greven

There's nothing wrong with the data I used

You should look at the source of that data(pdf): Single man earning the average wage ($43,500 in 2011 dollars) turns 65 in... 1960 Paid:$18,000 Benefits:$128,000 1980 Paid:$104,000 Benefits:$265,000 2010 Paid:$352,000 Benefits:$432,000 2030 Paid:$485,000 Benefits:$587,000 See some funny things with that?

What are you talking about "funny things" why don't you point it out for me?
You do know that social security didn't start until 1937 & that it wasn't always a 7.5% contribution amount right?

It started out at 1% & only crept up to 3% by 1960 so a person that retired in 1960 did not contribute anywhere close to as much as we do today considering in addition to the reduced percentage they only contributed for 23 years instead of the typical 43+.

IF you don't like the source find a different one - you'll see that the return is still worse than the 2.6% you were trying to bash.

Here's a link to the SSA tax table if you're curious:
SSA Tax Table

a reply to: Greven

a reply to: coldkidc
Let me give you a clear example of where the elimination of competition is more efficient: radio. Competition is perfectly fine - as long as no two broadcasters operate too close together. Remember, radio is a spectrum of different frequencies. The problem is that two transmitters operating on/near the same frequency can drown each other out to various extents, leading to interference and a damaged or destroyed product (the broadcast). Thus, inefficiency brought about by competition.

The concept of a natural monopoly is not socialist but rather practical. It exists quite regularly in technology - look at how dominant Microsoft Windows has been across the consumer and business sector in desktops - well in excess of 80% of the market. Other sectors are more competitive - UNIX/Linux are more popular in academia and as servers.

The elimination of competitors is not usually done by force, but rather the cost to enter (or expand in) the market is so steep that few try. Imagine twenty different companies each trying to lay sewage lines to your house. Then another twenty different companies each lay water lines. Then twenty more electrical companies run separate poles and lines to your house, as well. It would be insanity - and that's why it doesn't happen.

Google is breaking into the ISP market because it has so much money and it would benefit them quite a bit. The problem they've had is that private monopolistic companies have created exclusive contracts with existing regulated natural monopolies (power/phone companies) for pole access. Doing without pole access is extremely costly; it still ain't cheap to run lines with pole access, but it's far and a way cheaper than underground.

You logic is severely lacking my friend.

Your first example has nothing to do with the advantages or disadvantages of competition in an economic sense.
Yours is an example of an instance where the technology limits in that particular industry makes boundaries necessary...that's why the FCC regulates bandwidths.

Rather, elimination of competition would be you suggesting that having only 1 radio station on all of that bandwidth is somehow better than having the 20 or so we have on average which is an absurd suggestion.

To address your other points...
I only need 1 sewer line & electrical line to my house.
That is not elimination of competition...that is demand.
Anybody supplying something that is not demanded will go out of business very quickly.

I'm sure the land developer bid out to more than one contractor to determine which one won the right to install the tie-ins on my street though.
That's competition and it keeps prices reasonable because if your company is unable to put together a competitive bid and beat out the other bidders you will have no chance of being hired & no chance of making money.
Competition keeps the costs down for development...

From my own industry experience I have seen in person what happens to costs when there is no competitive bidding. It's not pretty & it gets very expensive very quickly once the vendor realizes they're the only company bidding.

Some industries are difficult to enter because of the resources required or the infrastructure required.
This does not suggest that competition is a bad thing but rather that there is less competition in some areas because of the initial costs to start a business in that industry & the difficulty involved in producing a competitive product.

In this case, it has nothing to do with the benefits or drawbacks of competition but only the investors belief that they could probably get a better return elsewhere because the initial investment is to high for the estimated return.

a reply to: coldkidc
I was referring more to the gap (1960, 1980, 2010, 2030). You can look at their methodology:

How did you adjust for life expectancy?

We used actuarial tables to adjust for the probability of living in all years after age 65. So, say the benefit is $20,000 a year. We assume that at age 65, 100 percent of the cohort having lived to 65 gets $20,000. At age 66, say, 98 percent of the group is still alive and receives the $20,000 benefit, and at age 67, 96 percent receives it. Roughly speaking, we multiply the benefit each year by the expected probability of being alive, convert to present value, and add the numbers up for each year to determine the expected lifetime value of benefits. This is similar to what an insurance company would do in determining how much to charge up front for an annuity that would stretch over one’s future life.

Now, there are a couple of issues with this analysis. For one, if you recall from the last page, there was an article I linked calculating life expectancy. The life expectancy of the poorest men was just over 74 yrs. The life expectancy of the richest men was just under 90 yrs. The life expectancy of someone in the middle was less than 85 yrs.

There's a catch, though: that research was based on deciles - breaking down income into groups. Here's where there's a problem with the liberal Urban Institute's analysis: they use average income. A person with said average income would not be in the middle of that decile chart because the average is so highly skewed:

The "raw" average wage, computed as net compensation divided by the number of wage earners, is $6,009,831,055,912.11 divided by 150,398,796, or $39,959.30. Based on data in the table below, about 66.2 percent of wage earners had net compensation less than or equal to the $39,959.30 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $26,363.55 for 2010.

You can also see that the 'average' wage used in the study was over $3k higher than government figures for the average. Breaking down the numbers with the above-mentioned deciles, there would be 15,039,880 income earners in each 1/10th puts the middle in the 25,000.00 — 29,999.99 range, like government figures estimate.

So, let's go by the median and do a bit of math (just with Social Security with a tax rate of 6.2%): $26,363.55/yr for 43 years would pay in $70,285.23 ($1,634.54/yr). Life expectancy is 84-85 years for this decile, so 19 years of benefits are collected. The quick calculator on SSA.GOV suggests $11,472/yr at 65, $11,592/yr starting at 66, and $15,312/yr starting at 70. Combined, that would be $287,520 over that life expectancy.

a reply to: coldkidc
You ignore an example where the elimination of competition is required, arbitrarily deciding that it doesn't fit into economic terms. I explained how it fit into economic terms. You don't want to accept this for reasons unknown to me.

You then create an argument that I allegedly would argue, when I just argued something else that you summarily dismissed. What would you call that?

Okay, you only need one electrical cable/sewer line. Maybe you get water from a well. How many electric companies/sewer companies are in your area? There's a rather good chance that it is just one of each, so you have no choice because it is a natural monopoly which is the entire point.

Natural monopolies that are permitted to exist are regulated by the government to lower prices for consumers, because governments realize both that natural monopolies exist and that they would increase prices unless restrained by regulation.