The Instigator
Pro (for)
14 Points
The Contender
Con (against)
0 Points

Personal Retirement Accounts should replace Entitlements

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Post Voting Period
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after 3 votes the winner is...
Voting Style: Open Point System: 7 Point
Started: 11/20/2012 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 1,609 times Debate No: 27375
Debate Rounds (3)
Comments (4)
Votes (3)




R1: Acceptance and Definitions
R2: Arguments and Rebuttals
R3: Rebuttals and Closing

Personal Retirement Accounts: Basically indivividual or jointly owned (say by married couples) accounts in which the owners save money to invest in various securities as they wish.

Entitlements: The social welfare programs ran by the federal government including Medicare, and Social Security. Mostly financed by payroll taxes.

*No new arguments last round
*No semantics
*Forfeit = automatic loss

Good luck!


I accept though ask voters do not give points for Grammar and Spelling as English is not my first language.

Personal Retirement Accounts should replace Entitlements: BOP rests with my opponent and they must show why there would be a net benefit from this change of schemes.

Make your case and good luck
Debate Round No. 1


Thanks for accepting. As per say the resolution, I will advance the notion that personal accounts should be used for personal retirement security rather than government entitlement programs.

C1: Personal Accounts Generate Higher Returns

Social Security has an annual rate of return of 1.23%. [1] The S&P 500 has about a 7% CAGR after administrative costs are taken in. [2] This is the average, so it includes both the horrible years like 2008 and the great years like 1998.

Assuming that the person had the average household income of $43,000 [3], worked for 35 years and had a retirement lasting 12 years, we get drastically different results regarding the two choices.

  • § Social Security (12.4% payroll tax), provides a retirement balance of = $234,330, or $1,627.30 a month.

  • § Personal Account (12.4% rate) provides a retirement balance of = $788,674.57, or $5,476.91 a month.

As we can see, personal accounts invested fully in the S&P 500 that yield just the average return of this index result with a fabulously high value, that would provide excellent retirement security.

Since Social Security has such a low rate of return, people who invested in the stock market could easily invest lower percentages of their income while getting a higher return for their retirement. For example, using the income used earlier, one could invest only 4% of their income in the stock market, and still have a higher retirement balance, while having over 8% higher take home pay (before including Medicare payroll savings).

To conclude, personal accounts invested in the S&P or other securities would create much higher balances for a secure retirement compared to Social Security.

C2: Improves the Economy

Having a huge infusion of wealth into the stock market makes the value of stocks go higher. This generates greater capital for businesses, which allows them to make critical investments in America through business expansion, wealth accumulation, investing in capital goods, or by increasing R&D. When businesses are allowed to use their wealth to pursue their self interest, society is better off with improved economic growth.

Payroll taxes discourage hiring. By eliminating these taxes, you likewise get more hiring and employment. In fact, some studies have pointed out an increase of more than 10% more jobs in the long run, by cutting payroll taxes by 10 points, or more than 3% more jobs in the short run. Assuming that individuals set aside 8% of their income, using the transitive property, this means job creation of more 11.5 million new jobs from a conservative estimate. [4] (this includes the elimination of Medicare payroll taxes.)

Economic growth leads to lower unemployment and higher wages, and thus a greater standard of living for society as a whole.

Also, Social Security and Medicare together have unfunded liabilities in excess of $121.5 trillion dollars, or more than $1 million per taxpayer. This is devastating, purely diasastrous to the economy. It's purely a message of economic devastation. [5]

C4: Economic Liberty

----- Freedom

By letting the individual have their own personal account, they are free to choose how they use their money, not acting under government coercion. This economic freedom leads to improved personal wellbeing — and people would have greater take home pay. Personal responsibility would make sure that often-times the money is used prudently and is fit for individual needs.

Personal accounts guarantee economic freedom, you are free to choose how you use your money.

Wealth accumulated in personal accounts could be passed onto their kin after their death, allowing families to have greater economic security.

----- Tax Relief

Payroll taxes are regressive taxes, and specifically harm the poor. The 15.85% of income that the poor pay in payroll taxes alone kills job creation and harms them particularly negatively by reducing their income. In fact, for some ethnic minorities they get back less in benefits more than they pay in. [1]

For the average household income, income would rise by $3,375.5, after assuming they set aside 8% for retirement.

C5: Historically Safe Investments

The 7% CAGR (compounded annual growth rate) for the S&P 500 is the average. This includes both the great years like 1998 and the bad years like 2008. It's the average. Since these stocks are remarkably safe over time, they are safer here than having government mess with it. Politicians have taken hundreds of billions of dollars from the Social Security trust fund to pay for things like the wars in Iraq and Afghanistan, and other projects. With this huge inflow of wealth to the U.S. government, it is likely to be squandered and used for other things. This reduces retirement security for regular Americans.


----- Health Care in Retirement

For secure health care during retirement, health insurance retirement accounts (HIRAs) are good options to use.

Let's say workers put 2% into their personal account. These funds are invested as to how the worker chooses. We will assume that the return of 7% is used again.

After 65, funds are annuitizied, securities are liquidated, and a fixed lump sum is deposited into the workers individual HSA annually, which makes personal responsibility continue to lower costs. The aspect of liquidating assets is completely voluntary.

Assuming $43,000 annually;

(43,000 x 0.02 = $860)

Total = 860 x [1.0736 - 1] - 860


= $ 127,205.58, or $10,600 a year.

As we can see, seniors will have health retirement security they need if this proposal was adopted by voluntary individuals. These funds would optimally supplement their health savings account, which would provide health care security to those in retirement.


Individuals should be able to have personal accounts to replace entitlements. People will have secure retirement, with high rates of return generated by the stock market. In fact, using just the average return from the S&P 500 would show that personal accounts would dramatically increase wealth for retirees, improve their security, while creating broad prosperity for Americans who are free to choose to invest and save their money where they wish.

Without entitlements, we would have a more limited government, with a lower public debt. Personal responsibility would replace Washington's transfers of wealth, that harm the poor by robbing them of large chunks of their income.

Ultimately, personal accounts ensure retirement security, and enhances and protects economic liberty. Job creation, and increased investment from businesses and individuals alike makes the economy grow, generating over 11.5 milllion new jobs while improving living standards, and increasing take home pay. Limited government reduces coercion, and a growing economy helps America flourish.

It's fair that you own your money because you earned it.

You have the liberty to choose how much, and where you invest your money.

You have the responsibility for yourself, and to make sure you have a good retirement balance.

You have the opportunity to make yourself wealthy in your retirement and help your kids.

If you had a stock that had a negative return, or didn't outpace inflation, you would dump it. Then why don't we dump our entitlement programs?









As a non-US citizen I will be attacking my opponent"s case primarily on theory and logic rather than specific American rules/laws/schemes. I will therefore not be using many/any sources and will be giving/supplying my own ideas. I leave it to the voters to decide if the logic follows and hope they don"t take the sources point from me.

My argument is extremely simplistic and is basically this statement. The Government can/does achieve a higher rate of return than individuals. What it then does with the proceeds is irrelevant as a net benefit to society has already been achieved.

R1: Personal Accounts Generate Higher Returns
There are flaws with my opponent"s argument. I will outline the problems first before going on to explain why actually the Government (in this case the USA) can achieve a higher rate of return for a lower risk.
My opponent has used the average S&P 500 CAGR for his personal account which he states shows an average return of 7%.
Flaw 1: Of course the 7% return is going to be higher than that of a Government Pension scheme as the Government hold a mixture of stocks, bonds and other investments. They do this to reduce the risk in the portfolio and guarantee a return. Shares are known to be a higher return, higher risk instrument.
Flaw 2: If you look at the data for the S&P 500 you will see that the closing level in June 1968 was 100. It then took 19 years to double to 200. Then 6 years to double again to 400. Again 6 years to double to 800 in 1997. In the following years it reached a high of 1,565 in 2007. My point here is that though the average return may be 7%, as my opponent claims, the affect would be massively different for someone that joined in 1968, someone that joined in 1991 and, god forbid, someone that joined in 2007.
Flaw 3: The return you receive from the Government is not the "true" return merely what they decide to payout to you. The "excess" is used for other state operations. If it were not then the Government would be forced to raise taxes to fund these other projects. A direct comparison then between state pension and private pensions is therefore pointless.

Government can achieve a higher rate of return for lower risk. I ask my opponent to specifically counter these if he can.
1.The government can hire professional/expert investors to manage the pension pot. Professional/Expert investors can achieve, on average, a higher rate of return for lower risk than the average day joe bloggs with his personal account.
2.By having such a large pot (i.e. everyone"s theoretical personal pot) the government can exercise purchasing power thereby achieving higher rate of returns. (Example: You receive higher interest if your investment is over a certain limit)
3.The Government does (obviously) not pay tax on any investments and can change the portfolio at will to market conditions. Personal Accounts (I"m not exactly an expert of American schemes) are only allowed specific investments, can only increase so much per year etc.
4.The pension pot is guaranteed. Some private run pension schemes to fail and when they do the investors lose money (I believe in USA 80% of the pot is guaranteed by the state but it would still result in a loss)

Logic Follow-On which counters C2: Improves the Economy
So if we can agree that the Government can achieve a higher return then any surplus the Government makes (i.e.what it earns minus what it has to pay as pension) can be reinvested or used to reduce taxes (including your example of payroll taxes) or increase services. This results in a net benefit to the economy as a whole

R3: No C3 given

R4: Liberty/Freedom and Tax relief
My opponent argues that everyone should be able to choose how they spend their money/where they invest which would lead to improved "personal wellbeing - ".greater take home pay"
This is a classic argument of state intervention or not. Let"s consider my opponents solution.

People can invest in whatever and where they like. Outcome: Some people (more sensible and better off) save money and put it in a pot for their future (earning a lower rate of return than Government can achieve). Some of these people may invest wisely and some may not.

However realistically many MANY more do not and spend the money now saving nothing for their future.

This leads inevitably to massive problems later on as pensioners run out of money. The normal effects of poverty (crime, civil unrest etc) will come to the fore and in the end the Government of the future will probably have to come and mop up the mess (at assuredly a net higher cost to the tax payer).

Payroll Taxes: Please refer to C2 counter.

R5: Historically Safe Investments
There can be no argument that a state pension is safer than a private one hence this is actually a point for State pensions over personal accounts. As to the rate of return please refer to R1.

Regarding the use of funds for wars in Iraq/Afghanistan to be squandered etc etc: If it was not taken from to social security pot it would be taken from somewhere else (further borrowing or payroll taxes maybe!). Again the main argument that Government can achieve higher returns for lower risk trumps all other points. The same logic need also be applied to your health care in retirement point

Solution: Government achieves higher rates of return on investments due to better management and higher purchasing power resulting in a net gain. How this extra gain is used (higher pension payments, reduced payroll taxes, reduced insurance costs or funding the Afghanistan war) is irrelevant as the net benefit has already occurred.
Debate Round No. 2


Thanks for your fast response.


R1: Personal Accounts Generate Higher Returns

"Flaw 1: Gov't has lower risk, shares are known to be a higher return, higher risk instrument."

All financial instruments have risk, we both know this. For the stock market, it's fluctuations in value. For the government entitlement scheme, it's the government fiddling with your money, to spend it elsewhere on things like the Iraqi War, reducing the deficit, earmarks, etc. And the risk of gov't cutting Social Security benefits.

However, the stock market (S&P 500) had an average CAGR of 9.62% from 1957 - 2011. [1] However, lets be more conservative. Based on the average CAGR, we can expect a healthy return in the about 5-9% range with an investment horizon that spans an average working period.

For government, as I sourced last round, only provides a return of 1.23%. This is diastrous. Most of the time it doesn't exceed inflation. This means we are losing money via this process.

The return for many people, especially the poor as I showed last round, is negative.

So, risk is inherent to both retirement plans. That's a fact of life. However, you can use your money better than the government can. And the CAGR has been much higher than Social Security.

CAGR: Compounded Annual Growth Rate

"Flaw 2: ... My point here is that though the average return may be 7%, as my opponent claims, the affect would be massively different for someone that joined in 1968, someone that joined in 1991 and, god forbid, someone that joined in 2007."

Remember, the growth rate of roughly 7% is over time. It's the average of all years. From what you put, in June 1968 the closing level was 100. Then 25 years later it was 400. This is still growth, that occurred while the vast majority of people would still be working.

The 5-9% CAGR is the average again. This includes the awesome and horrible years. Since the rate of return is much higher than gov't, and this growth rate is the common standard for the market, it should be preferred.

"Flaw 3: The return you receive from the Government is not the "true" return merely what they decide to payout to you. ... The "excess" is used for other state operations."

True. My opponent admits that the government does steal our money through coercion, and instead of dedicating it to our retirement like they said, through the political process portions of it are distributed elsewhere. This is obviously dangerous to retirement prospects.

If we want true retirement security, gov't has a failed track record. This return oh so does matter. The amount taken from Social Security/Medicare for other things is still negligible (probably less than 25%), but it still threatens the prospects of their future plans.

R2: "Government Can Achieve a Higher Rate of Return"

Sub1: Yes, expert investors are prone to getting a higher return. But remember that the risk for the stock market over time is not historically high.

The problem of having gov't hiring professional experts to manage the pension pot is several. Assuming you meant that gov't collected payroll taxes and THEN invested in the stock market, this is very open to the political process. If GE lobbyed hard enough, they could get an infusion of hundreds of billions of dollars. Trusting politicians with people's money, and choosing which company to invest it in makes government pick the winners and losers. Consumer choice, rather than cronyism, should be the route to take.

Sub2: I don't get this part of your arguments unfortunately. Though I do not see how gov't exercising purchasing power is fair. It's not fair that gov't can take money from one person, and through various rules, transfer it to somebody else. In all inherent political processes, one person's loss is usually another person's gain. If Paul gains $5 through this gov't process, that $5 must come from Jane. By using coercion to carry out these acts, it's simply wrong -- it's legalized theft from one person.

Sub3: The negligible current 15% tax on investments is just that - negligible. Let's assume that the 1.23% return on Social Security was already taxed. The return would be really 1.414%. Just because gov't investments are not taxed doesn't mean they are inherently good. Quite the contrary, evident by their low returns and misguided usage.

Sub4: Remember, Social Security benefits are subjected to the political process. Social Security benefits are not guaranteed — they can be cut at any time.

Private pensions are one thing, personal accounts could be and would likely be an addition to this system. All financial instruments have an element of risk. So does Social Security, and it isn't absurd to say the same or more risk than regular shares, without the benefit of high returns.

R3: Improves the Economy

If gov't does try to get a higher return (if possible), it means much more taxation to get that kind of money, cronyism by picking the businesses in which to invest in (imagine the horrors), and more redistribution and coercion. Redistribution crushes the investments which makes the economy grow and thrive, coercion reduces freedom and human dignity.

So, more taxation, regulation, special interests. None of which are good for the economy or freedom, as you are not free when your payroll taxes must go up, that reduces your economic freedom.

Payroll taxes do have a real drag, which I've proven, as their elimination (proved last round) would create millions of new jobs.

Also, this huge infusion of capital, by the free choices of individuals picking where they want to invest, not gov't picking the winners and losers — would vastly improve economic growth. From 1940 to 1980,about half of U.S. economic growth came from the increase in U.S. capital formation. [2] With literally an infusion of trillions of dollars, America would prosper.

R4: Economic Freedom/ Tax Relief

There is an alternative, that has been suggested to fix both solutions if people don't save enough. Automatic enrollement, [1] where workers are automatically enrolled into a personal account plan that they control, like what I'm advocating. They are part of this individual retirement scheme unless they explicitly decline.

And once most people are in there, they are likely to stay, since most people are rational individuals and not full out crazy to squander all their money.

"There can be no argument that a state pension is safer than a private one"

I agree.

===============Restatement of Argument===============

Personal Accounts fully invested in the S&P 500 generate much higher returns, about a 5-9% CAGR. This means that if you set aside 10% of your income, rather than than current 15.6% of your income, you could have a secure retirement plan with a balance of $636,027.88, which would mean higher take home pay (5.6%), and retirement income over triple the payments from Social Security. Triple.

---------Government Financing of Pensions:

I don't see why gov't financing of a national pension plan would help increase interest rates. This would mean a huge increase in payroll taxation, a huge political challenge of Cronyism (which company should get billions of the hard working taxpayer's money?), and still less security - look at the returns.

For personal accounts, it's fair that you get to keep what you earn. You have the liberty to choose how it is invested, and you have the real opportunity of retiring wealthy.


Personal Accounts have Higher Returns, Could Triple Benefits (7% vs 1.23% CAGR, or 469% higher)

Improved Economy: Higher Take-Home pay, Millions of New Jobs, Capital Infusion

Are Historically Safe, average of 5-9% CAGR vs 1.23% for Social Security

Protect and Restores Individual Freedom

Increases Economic Opportunity

Enhances Retirement Security


Would Eliminate Our $121 TRILLION in Unfunded Liabilities (unrebutted)

Thank you for reading.






Well lets get straight into this

R1: Personal Accounts Generate Higher Returns

"Flaw 1: Gov't has lower risk, shares are known to be a higher return, higher risk instrument."
My opponent has failed to understand the point. All financial instruments have risks but some higher than others. For those that are higher risk one requires a higher return to risk investing. The Government pension pot and almost all private pension pots will contain a mixture of instruments so quoting a pure share return % is not a suitable Benchmark to compare returns.
Secondly the government"s return is not 1.23%. This is just what they choose to pay out to you. The actual return a government receives on its investments, as conceded by my opponent, is actually higher than that which alone could achieve by yourself. (see round 2)

"Flaw 2: ... My point here is that though the average return may be 7%, as my opponent claims, the affect would be massively different for someone that joined in 1968, someone that joined in 1991 and, god forbid, someone that joined in 2007."
Again my opponent has missed the point. The average return rate looks great. HOWEVER when people join would have a massive impact on the value of their pot. An extreme example would be that someone who started investing in 2007 would up to now have lost money! i.e. currently be standing with negative return rates. It is not a fair or reasonable assumption to assume the next 30 years will be as rosy as the past 30. (If it were this simple then nobody in their right mind would have a bank savings account earning 2%.....)

"Flaw 3: The return you receive from the Government is not the "true" return merely what they decide to payout to you. ... The "excess" is used for other state operations."
I am accused of admitting that government steals our money"Well actually all money belongs to the government and all government belongs to the people so who is stealing from who"(good topic for another debate)

What I was saying with this statement is that comparing S&P 500 returns with what you receive from the Government is not a meaningful comparison. In answer to your accusation that Government is stealing your money to use on other projects I have the following answer"..YES!!!! And the whole point is if they didn"t take the cash from the social security pot it would be taken from elsewhere (increased taxes, reduced services etc) but one way or another you will pay for it. Now the reason it is better to have a state pension is that they achieve a higher return on the money than joe bloggs resulting in a net benefit. i.e. in total you have to pay less.

R2: "Government Can Achieve a Higher Rate of Return"
Sub1: Opponent conceded
Sub2: Your logic is right. A gain somewhere must be a loss somewhere else. However in the case of state investments they often hold massive investments in foreign government bonds and other investment types. The result of this power (i.e. ability to demand higher returns for access to the big US cash pile) results in a net gain for the USA and a net loss for foreign countries. Hence why a state pension is preferable.
Sub3: Opponent conceded albeit by his reckoning it is only a 1.414%. It is still a benefit
Sub4: Social Security benefits are subject to political process and you vote in this political process. This means any decision to reduce pensions is one you have voted on. If you are not happy vote for a different party"

R3: Improves the Economy
"If gov't does try to get a higher return (if possible), it means much more taxation to get that kind of money" NO!!!!!
The government is already doing this scheme using your social security contributions. It needs no additional funding. It is the current status quo. The government also does not need to pick business to invest in, it simply reduces company taxes benefiting the economy as a whole (Tax relief and Business Investment are 2 sides of the same coin).

R4: Economic Freedom/ Tax Relief
I believe is this section my opponent effectively concedes the debate. He advocates an "automatic enrollment" personal account. This is exactly what a state pension is. The only difference being that the individual would choose what investments he/she wants. As we have already shown that the government can achieve higher returns than individuals it is preferable for the Government to choose/manage the investments"..which means a state pension is preferable

I have shown that the state pension has a higher return/risk ratio than private accounts.

I have shown that state pensions provide stability and a guaranteed minimum basic livable income once a person reaches retirement

I have shown that if the government was not "skimming the top" of the pension pot for other projects they would be forced to raise taxes or cut services. (i.e. the only way to get a net win to achieve a higher rate of return from foreign countries)

I have shown that personal accounts (even those based on historically stable and high growth shares such as the S&P 500) are not guaranteed and there is no market expectation that the next 30 years will be as successful as the last.

I have shown my opponents comparisons of CAGR are incorrect and meritless.

I urge a vote for con
Thanks for a good debate.
Debate Round No. 3
4 comments have been posted on this debate. Showing 1 through 4 records.
Posted by Paramedic268 3 years ago
Good debate on both sides, especially for a non us citizen..impressive. i am new, and can't vote yet, but I am not sure which way I would vote. Am very glad my wife found this site.
Posted by Contra 3 years ago
Don't be shy people.
Posted by Contra 3 years ago
Sorry, was my bad.
Posted by wiploc 3 years ago
No new arguments in the last round by Pro either.
3 votes have been placed for this debate. Showing 1 through 3 records.
Vote Placed by BA_BA_BA 3 years ago
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Reasons for voting decision: better arguments
Vote Placed by miketheman1200 3 years ago
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Reasons for voting decision: This was a big pro win. The innabilty for con to adress the issues of personal liberties and the right to ones earnings was a big mistake. I had a hard time understanding cons rebuttles as well. Conduct to pro because of cons "Vote con", which to me is always loss of conduct if the other side does not do it. Sources go to pro. Pro used reliable sources while cons one source was wikipedia which im pretty sure isnt even allowed on this site (correct me if im wrong). Grammer is a tie. Thank you both for arguing this topic.
Vote Placed by Microsuck 3 years ago
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Reasons for voting decision: I feel that the winning argument in this debate was the personal liberties argument. Con never really got around to the fact that we own our money because we earned it; therefore, we should have the liberty to choose how much, where, and when you invest your money. This also means we have the responsibility ourselves and not the government. Con's rebuttal to the fact personal accounts revenue more than government was lacking and unconvincing.