Microsoft, Uber, Dell CEOs Consider Government-Funded Stock Funds for Children (cnbc.com) 149
"Government-funded investment accounts for children could be on the horizon," writes CNBC, "and if tech investor Brad Gerstner has his way, corporate America will match the funds..."
Gerstner been working with lawmakers to promote a legislative program known as Invest America that would create an investing account seeded with $1,000 for each child that's born in the U.S., but it's still too early in the process to publicly name supporters. He's aiming, however, to have legislation passed before the next presidential election. At the same time, he's working with corporate America to encourage businesses to offer matching funds to help employees further their savings.
"The vision is simple — that corporations would include an Invest America match of $1,000 into the Invest America account of children of their employees," Gerstner, founder and chief executive of Altimeter Capital, said in an email. "We have talked with companies ranging from Zillow to Dell to Uber and, subject to details, the response has been overwhelmingly positive," he said. Rich Barton, co-founder and chief executive of Zillow, said it's a "no-brainer" for his company to fully support and match the type of program Gerstner is proposing. "A 401(k)-style investment account from birth seems like a great way to tackle the growing divide around financial literacy and wealth," he said in an email. "It is a small investment to help parents achieve more peace of mind."
Representatives for Microsoft CEO Satya Nadella, Michael Dell and Uber CEO Dara Khosrowshahi, other companies Gerstner cited in a recent CNBC interview as being receptive to his pitch, did not respond to email requests for comment...
Certainly, there can be tangible — and intangible — benefits to companies that participated in a matching program. For instance, the government would have to provide tax incentives to companies that would presumably function similarly to how deductions are handled for 401(k) contributions, said Jeffrey Sharp, executive vice president at HUB International, a global insurance broker that provides employee benefits, and other products and services. Someone with $1,000 in her account at birth could expect a balance of about $107,000 by age 67, provided the portfolio grew at an annualized rate of 7%, according to CNBC Make It's compounding interest calculator. With a company match, a $2,000 investment could grow to around $215,000, under the same conditions. The outcome could be even more beneficial if parents contribute additional funds.
The article also hedges that companies "would have to consider the advisability of paying for this type of benefit that not all employees could take advantage of. They might decide, for instance, they'd be better off upping their 401(k) match so more employees could benefit."
But "I think we have a historic moment right now to get everybody into the game of capitalism," Gerstner says in an interview, noting it would cost just $3.7 billion to fund 50 million accounts -- "less than 1/100th of 1% of the national budget" -- and that he hopes to see the legislation introduced next year "in the spring."
"The vision is simple — that corporations would include an Invest America match of $1,000 into the Invest America account of children of their employees," Gerstner, founder and chief executive of Altimeter Capital, said in an email. "We have talked with companies ranging from Zillow to Dell to Uber and, subject to details, the response has been overwhelmingly positive," he said. Rich Barton, co-founder and chief executive of Zillow, said it's a "no-brainer" for his company to fully support and match the type of program Gerstner is proposing. "A 401(k)-style investment account from birth seems like a great way to tackle the growing divide around financial literacy and wealth," he said in an email. "It is a small investment to help parents achieve more peace of mind."
Representatives for Microsoft CEO Satya Nadella, Michael Dell and Uber CEO Dara Khosrowshahi, other companies Gerstner cited in a recent CNBC interview as being receptive to his pitch, did not respond to email requests for comment...
Certainly, there can be tangible — and intangible — benefits to companies that participated in a matching program. For instance, the government would have to provide tax incentives to companies that would presumably function similarly to how deductions are handled for 401(k) contributions, said Jeffrey Sharp, executive vice president at HUB International, a global insurance broker that provides employee benefits, and other products and services. Someone with $1,000 in her account at birth could expect a balance of about $107,000 by age 67, provided the portfolio grew at an annualized rate of 7%, according to CNBC Make It's compounding interest calculator. With a company match, a $2,000 investment could grow to around $215,000, under the same conditions. The outcome could be even more beneficial if parents contribute additional funds.
The article also hedges that companies "would have to consider the advisability of paying for this type of benefit that not all employees could take advantage of. They might decide, for instance, they'd be better off upping their 401(k) match so more employees could benefit."
But "I think we have a historic moment right now to get everybody into the game of capitalism," Gerstner says in an interview, noting it would cost just $3.7 billion to fund 50 million accounts -- "less than 1/100th of 1% of the national budget" -- and that he hopes to see the legislation introduced next year "in the spring."
JFC no. (Score:4, Insightful)
We should not be turning to corporate America to solve our problems. They're really good at giving us the best twinkie or hot dog or Twinkie/hotdog combo. Solving broad societal issues not so much.
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Go find a failed mega corporation and odds are you'll find a ton of their stock being bought up by a public pension fund right before they collapsed and usually sold to it by somebody wealthy and well connected. Mostly in red or purple states....
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Bonds, index funds, there's a lengthy list of potential securities for people to invest in. It stuns me that this is an actual question on Slashdot. This place used to be populated by smart people.
You think index funds are not the stock market?
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They're about 50-50, I think. There are index bond funds, for example.
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Bonds are fine I suppose. Low risk, low return.
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Vanguard Total Bond Market Index Fund [vanguard.com]
30 day SEC yield: 4.83%, YTD: 0.68%.
Yeah, that's not keeping up with inflation. But it's an index fund that invests in bonds.
Fidelity US Bond Index Fund [fidelity.com]
1 year return: 0.34%, YTD 0.58%, 30 day yield: 4.73%
The fidelity equivalent.
The 0.1% difference is probably that Vanguard is a "lower cost" investment broker, so the amount that Vanguard takes to fund their own operation is a bit lower.
As a note, the rise in interest rates has totally killed bond funds right now. This i
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Oh, totally. With an estimated 18 years until they need to touch it (college/moving out and buying a house), that's a lot of allowable risk right there. If it's forced to be a retirement account, you're looking at ~67 years, which should be the least risk adverse group possible. Within limits, of course. Don't want to go investing in crypto or such and have the possibility of losing it all.
There's plenty of safe investments (Score:2)
The voters can't keep watch 24/7. It's easy to pull the wool over the eyes of somebody working for a living. Sooner or later you get confused or distracted by social issues or fast talking charismatic politicians and they gut the system.
On a long enough timeline education and critical thinking will stop that. But in the meantime you have to stop it from happening before
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buy 130 houses and raise the rent every month and charge new and exotic fees.
If a public pension fund were to actually do this, the first thing that would happen is tenant unions lobbying Congress to pass a law limiting rents charged by the fund, as is done in New York City. Then the teachers and other public pension holders would complain that their fund "is making bad investments."
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D'oh! You were soooo close! You had such a good start then turned back to your lame 1%er commie thing. I was about to congratulate you for getting it right for once.
The reason not to do this is it's a giveaway to tech companies on the backs of tax payers. Since the government runs a deficit every year this is all printed up fake money boosting tech stock prices. That printed money, like all faked up money will just increase inflation which will devalue those stocks to nothing for the kids and leave the
Re:JFC no. (Score:5, Interesting)
Every time the Feds crank up the money printers, all that extra cash winds up distorting real estate and stock markets. Among other things. This way you're just cutting out the middleman.
Funny that rsilvergun didn't notice the scheme being a way to effectively nationalize publicly-traded companies.
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And every time the necessary thing is discussed - raising taxes on the rich cuz when you give rich people money like we did in COVID, they tend to spend it on assets - the rich folks use their media outlets to flood the zone with nonsense about unemployment (a necessary condition for capitalism) and inflation (price spiral, anyone?) as to distract from the fact that the folks that own the media outlets are the ones ruining the economy.
Given how many economists predicted interest rates would rise between 2
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Anyway, spouting neoliberal economic messages, AKA Chicago School, seems to be the way to get ahead nowadays so you can hardly blame the ones on the telly & other corporate media from cashing in. Of course, they have to pretend that Nobel Prize winners, Daniel Kahneman & Vernon Smith, provided conclusive evidence that so called "rational ec
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I'd rather they cut spending than raised taxes (as an alternative to money printer go brrrr).
There's an easy solution to that (Score:5, Insightful)
The parents of the baby boomers knew this so they heavily invested in the country by a government programs and socialism. The mistake was because we were fighting people who claimed to be Communists at the time they didn't tell their children they were getting the benefits of socialism and instead hid all that on the back end. The result was the me generation and an entire generation who thinks they pulled themselves up by their bootstraps when in fact they benefited from social welfare programs that were necessary to have a functioning society.
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Our money printing has vastly outstripped gains in productivity. Also they money that is "given" to the 1% frequently comes from people voluntarily buying things they often don't need. Apple is a excellent example of this phenomenon. That their total value exceeds $1 trillion ought to tell you what our society really values when the vast majority of their growth has come from discretionary private sector spending. When common factory workers are walking around with $1k+ iPhone, it should be evident who
You're a gold bug aren't you? (Score:2)
Anyway to address you're point no, we're nowhere near the limits of our economy
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Government needs to grow, not shrink (Score:2)
You know all those productivity gains that keep happening? Where did they come from? Automation, that's where. But we pay people based on their productivity, not the productivity of the machines.
Especially with LLMs pushing automation all over We're either going to start using government more to organize our economy (like we've already been doing successfully for decades with the Farm Bill and the Army Core Of Engineers) or
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I think Blackrock has swooped in to be the biggest ownership entity: https://www.visualcapitalist.com/blackrocks-top-equity-holdings-2023/ [visualcapitalist.com]
Private military companies and huge stock owning companies will likely be an interesting story going forward.
Inflation (Score:2)
Every time the Feds crank up the money printers, all that extra cash winds up distorting real estate and stock markets.
Actually printing money like that tends to cause inflation which, interestingly is where this plan seems to largely fall over. While a 7% annual return compounded for 67 years may give you $93k, that $93k will only be worth about $26k in today's money if you assume a 2% annual inflation rate which, while nice, is not really much of a game changer for retirement.
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The reason not to do this is it's a giveaway to tech companies on the backs of tax payers.
In this case that can easily be resolved by making sure corporate America pays their taxes. That money can then be used to fund the government side of the program.
It's always amusing when these private industry folks talk about the government spending money to do something. They're so far out of touch they don't even realize where government money comes from.
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Whether or not companies pay taxes the government has no business buying stocks for anyone.
If you were saying that this scheme is ok as long as companies pay taxes then I vehemently disagree with you but I wasn't certain that was your plan.
Anyway, thankfully, no one else is willing to embarrass themselves by supporting this bill in public so far. Hopefully it dies without a second backer.
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If they want to invest, which most people don't, they can put money in their 401k or any of a million index style funds. Individuals shouldn't be buying single stocks anyway.
You know how many people don't max out their 401k match much less max out the full thing? Or don't max out their ESPP and other free money options?
And no the government should not be taking tax dollars or printed cash and putting it into the market. The moral hazard alone is reason not to plus the other zillion reasons that have been
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LOL "lame 1%er commie thing" it sucks that none of us are gonna be alive to see the day when people laugh about the fact that humanity used to think this way. You're bad at thinking and would be ashamed of yourself were you capable of that level of cognition.
It's amusing that you're so certain that a Communist Utopia will definitely happen some day if they just keep trying it enough times. Surely they could have managed to execute the idea in a couple centuries if it's so good. (Cue excuses about external forces 1,2,3,... ad infinitum that have so meanly stopped such a durable and wonderful form of government from working. All it requires is the global extinguishment of basic human instincts like greed and power and we can definitely have a Communist Utopian
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Enough times? True communism hasn't even been tried once. What we called communism in the past was merely a dictatorship.
No True Scotsman. A real logical fallacy classic.
Ever thought that perhaps each try was true communism and the whole problem with such a system, as I alluded to in my previous post, is that human nature will derail it every single time? It never succeeds so it has never been "truly" tried according to the people who believe in it like a religion.
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Uh no. When you are holding an apple and you call it an orange you can't claim no true Scotsman. There are very specific steps that need to be followed for communism. For one thing, it is supposed to be preceded by capitalism and there is no one dictator. In communism the people have more say then in capitalism because everyone owns everything. This has never been done.
Huh yeah, just forbid dictators, and get capitalism and then you draw the rest of the owl and everyone owns everything. Simple. Crazy that no one has ever done that complex and nearly impossible series of events to create "true" communism before. All the ones trying fake communism just needed you to put them on the right track and then we would have had it for sure!
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I don't know what you are talking about with the forbid dictators thing. I was just saying if a country is led by a dictator then it's not communism because communism is pretty much the exact opposite of a dictatorship. You are just having trouble going against your programming.
It isn't "programming" to realize that some edge case fantasy scenario that's contrary to human nature is never going to happen "for real" because every time someone tries it, it devolves into a dictatorship where the wolf takes control of the henhouse. The no true scotsman is a classic way for communists to deflect how detached from reality and human nature their fantasy system of government is - because if it fails then it's never been tried and can still be believed in, even though every time it's tried
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communism is pretty much the exact opposite of a dictatorship
Too bad nobody told that to Marx and Engels. They teach that dictatorship (of the proletariat) [wikipedia.org] is a necessary, unavoidable step in the transition to communism. In their opinion, only this dictatorship provides the force needed to violently expropriate the owners of the means of production - and therefore, it's a good thing. Engels even admired the Paris Commune, which he saw as a real life example of a dictatorship of the proletariat - and we know how well the Paris Commune worked out, and we know its huma
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Then pool your resources with a few thousand other like minded people and exercise communism to your heart's content. No one is stopping you. Although perhaps it could be a problem if you and all your like minded people actually haven't produced enough to have acquired assets to allow you to accomplish that and don't think you can do so in the future even if you can scrape together enough to start the experiment.
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Lemme know when we live in Star Trek world. Until then, here in reality, communism is a proven failure, human nature is what it is, and there's no two ways around it. If you mean non-AI machines then we already have those for a long time productivity has already skyrocketed and we have a labor shortage.
I don't have "true communism", or cold fusion or a flying car and don't expect we'll see any of them in any of our lifetimes or likely ever.
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The problem is that defies human nature except in very small groups. Even then, it rarely works for long - look at the communes of the 1960s and 1970s in the US and consider how many still exist - in spite of all participants being like minded and enthusiastically volunteering to join the commune. Some families manage to exist in much this state,
So I don't think human nature is the problem (Score:5, Informative)
We see this pattern again and again and again in every single culture and every single government on the planet. In America we use skin color, in India they have a defined caste system, in Japan where they didn't have an easily identifiable minority group they invented one out of whole cloth, the Burakumin.
The upshot to all this is that it turns out that higher education and teaching people critical thinking and how to evaluate claims makes this tactic stop working. The downside is that the ruling class know this and have known it for a long time and will fight relentlessly to prevent the vast majority of the population from gaining critical thinking skills. It does appear they're losing that battle but again it looks like they know it and they're going to make one last major push before the shift comes and they start to seriously lose power
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Enough times? True communism hasn't even been tried once. What we called communism in the past was merely a dictatorship.
No True Scotsman. A real logical fallacy classic.
Ever thought that perhaps each try was true communism and the whole problem with such a system, as I alluded to in my previous post, is that human nature will derail it every single time? It never succeeds so it has never been "truly" tried according to the people who believe in it like a religion.
Things like communism fail because they don't take human nature into account. Unhindered capitalism will fail quickly too. Yes, Communism ends up as dictatorship, and classless societies become more and more class stratified. If you want to have "true" communism, you have to create a new type of human. We had a group or two try that in the past, both in a communist country and a virulently anti-communist country. That didn't work out well.
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Yes. I am sure in some future Star Trekian utopia when no one has to work for anything, computers and robots take care of all of our needs from cradle to grave, disease, war, plague, and bad Hollywood sequels have been stopped, and we have cold fusion on the kitchen table to go with our flying cars and personal jet packs, then everything will be in place for "true communism" to take hold.
And it will still fail.
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Ad hominem nonsense.
Please explain how pumping endless dollars into the economy doesn't create inflation.
This'll be good. I'm waiting for a good laugh from a macroeconomics expert such as yourself.
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I'm not smart. Not at all. Just way smarter than you. It's a low bar I've set myself but I easily step over it every day.
Dumb AC can't even read. My name doesn't imply that you are smart and I'm smarter. Just that however stupid I am, you are dumber.
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Sounds to me like it'll all get invested in crypocurrency, which someone will then "lose" the password to.
Social Security Goodbye (Score:3)
Perhaps I am too paranoid, having spent my working life watching certain political groups attack social security or change it into a managed wall street moneymaker (we at xxx investing, will take our experience and your money ... and make it your experience and our money...etc). Somehow this idea really sounds like an attempt to lay the groundwork for killing off social security. Oh, it will be a government program to be sure, but someone will have to manage the funds. Even if they do go down this road I will be long dead by the time it starts sucking the life out of the workers.
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Social security is already dead. The old now take their payments off the backs of the young.
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That's been true for a long time. When I first started working I understood even as a kid I couldn't expect to get any SS.
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You'll get SS. You'll even get $10,000 a month. The only problem is a loaf of bread will cost $25.
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$25 or $25k?
Getting $10k/month when bread costs $25/loaf isn't that bad.
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Sure, but the retirement age will probably go up to 70+. However high it needs to go to balance out the program.
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There's a couple problems with social security. First, it's heading for insolvency anyways unless fixed (again). Second, it's basically a giant pyramid scheme. While you'll get statements that make it look like you're making investments towards your own retirement, your payments are just going to cover current retirees.
I remember reading recently that the biggest difference between whites and "disadvantaged minorities" these days actually tends to be more about assets. Your average middle class white pe
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Easily fixed if you lift the tax cap. Right now, only the first $160k of income is taxed for SS purposes.
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Keep in mind that since benefits scale with contributions, albeit non linearly - largely due to bend points in the benefit formulas, lifting the cap will also increase the benefits drawn from the fund. Successful people could be getting "checks" in retirement from SS in excess of $100K/month (in today's dollars) - I'm not sure how popular that would be. However to fail to scale benefits with contribution levels would just turn SS into a welfare program which would reduce the political popularity of the prog
All to help the children (Score:3)
This is a fantastic idea. Lets force these companies that lobbied for this to print 20% extra stock to give to the children of America. As they want to help children so much I'm sure they'd be delighted. Any other takers? No?
CEOs/Founders/Co Owners/Advisory board members (Score:2)
of public listed companies on the stock market suggest to the government to forcibly invest tax money into the public stock market.
It is totally excluded that these people are biased somehow.
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of public listed companies on the stock market suggest to the government to forcibly invest tax money into the public stock market.
It is totally excluded that these people are biased somehow.
The next time the taxpayers are forced to hand over their money to prop up a failing business, the taxpayers should be given stock in that company. After all, it's their money so they're part owners. It's only fair they should share in the reward of a saved company.
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Or better yet just don't save them. Let them die and some other smaller company can buy up their IP, factories, software, etc for cheap and maybe do it better.
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Or better yet just don't save them. Let them die and some other smaller company can buy up their IP, factories, software, etc for cheap and maybe do it better.
That is my preferred method, let the free market work its magic, but I said when taxpayers are forced to hand over their money, meaning the preferred option will not happen (except in that one case).
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I'm going to live in Happy Fantasy Land today where we don't live in a bad place where tax payers get fucked every time the dumbasses running some industry into the ground get our money to keep doing the same stupid shit that put them there in the first place.
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To a degree, the stock market depends on constant money flowing in to support all the people profiting from it.
Only to a degree though. Really what drives the stock market are the profits that companies make. That's what stops it from being a very big Ponzi scheme.
How to ... (Score:4, Insightful)
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Given how little money that actually is, perhaps MS; Dell; Uber; etc. ought to fund it themselves.
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You mean the first $3.7 billion. Then obviously that isn't enough so we need to put in more and and and more! And if you try to cut it or not increase it then you hate children!
Think of the children!
[redacted] (Score:2)
they seem to think we were all born yesterday but somehow i doubt they will be willing fund this for all of us
Privatizing Social Security (Score:3)
Seems like a way to privatize Social Security piecemeal while obscuring what you're doing, a la (euphemism alert) "Medicare Advantage" and "School choice".
I imagine the plan is: let Social Security go insolvent, use the "crisis" to implement deep benefit cuts, then people will start pouring money into their government-issued 401k.
Sounds like a hellish public-private chimera that will probably give us the worst of both worlds, like it has in our healthcare system. But hey, lots of people buying stocks! (And whichever stocks our government has "independently" chosen to include in their portfolio, of course.)
Stick market subsidies (Score:2)
This is another attempt to get subsides for private companies. The government starts pumping money into the stock market creating both more government debt and more corporate profits. And of course some people will make some nice commissions managing these.
Just become The Unincorporated Man... (Score:2)
and be done.
https://en.wikipedia.org/wiki/... [wikipedia.org]
Meaning turn regular people into corporations, and make current corporations into non-government organisations by default that offer currencies too (maybe backed by their own stocks).
Great news! (Score:2)
Scam. (Score:2)
"get everybody into the [rigged] game" (Score:2)
When a monkey throwing darts can beat many "money managers" the game isn't real. No you can't win by hard work and effective thinking. You can be lucky and then explain why you were using the reasons you chose your path with. Then fail using the same tools later.
What is the cost of allowing this "game" to continue? This lottery that people claim isn't.
We can't even measure if people are happy or not (at least not reliably). If you can't measure something then you can't systematically improve it. Or me
No longer too big to fail; Think of the children! (Score:2)
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Yes I do. Why are you asking?
Data Point (Score:2)
We had a chance to fix social security, and we blew it.
Back in 2004, the President proposed putting 2% of a person's annual income (out of the 13% employee+employer social security withholdings) into a private account owned by that person. I was 29 at the time. If enacted and invested wisely* that 2% proposal would have covered 100% of my social security benefits from age 67 to 86. If I was the average person, I'd die before I ran out of that money.
If I were 21 at the time instead of 29, it would cover 10
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I'll run the numbers for a scenario where someone makes the median income for 46 years tomorrow, but my intuition is that it's going to work out the same. SS Benefits scale proportionally to your maximum income of any 10-year period, so I'd expect it to stay proportional.
The place where it does fall down is for people that don't work their entire adult lives. For them the picture would be less rosy, and I'd *hope* the 11% of everyone else's lifetime income (up to the cap) would be sufficient to cover it.
F
Half of this⦠(Score:2)
They just don't bother hiding it anymore (Score:2)
Ya know, when I was young, grifters at least tried to hide their swindle somehow, they didn't outright state that and how they're gonna rip you off. At least you got a bit of a dog-and-pony show out of being swindled out of your money.
Here's a radical suggestion (Score:2)
Pay employees living wages. Provide universal single-payer healthcare so a medical emergency doesn't bankrupt someone. Provide a minimum amount of legislated paid vacation.
Don't faff around with half-baked ideas like this.
Math?? (Score:4, Insightful)
noting it would cost just $3.7 billion to fund 50 million accounts ...
In my world, 50 million x $1000 is $50 billion, not $3.7 billion.
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noting it would cost just $3.7 billion to fund 50 million accounts ...
In my world, 50 million x $1000 is $50 billion, not $3.7 billion.
I noted that, but there are about 3.7 million births per year in the US. Not sure where the 50 million comes from other than as an arbitrary number.
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They mean $3.7 billion per year. There are about 3.7 million births per year in the US.
Good idea...if... (Score:2)
...the assets are owned totally by the children with no possibility of the parents getting it
Alternate headline (Score:2)
Alternate headline: We need more people to buy our stocks, can you please "do it for the children"
Investing in future is the right thing to do. And in general, I would agree with parents buying stock for their kids as a long term present. However making the government do this, preferably picking winner stocks selected by the fat cats, would get the opposite reaction from me.
They need to keep up the gravy train. Stock compensation is how companies keep talented workers at (relatively) lower salaries. However
sounds like... (Score:2)
...someone's getting ready to announce the insolvency of social security, is what that sounds like. "Oh, we can shut that down now, every kids going to have a $200k fund in their name anyway..."
(and anyway, with the actual, non-jiggered-numbers inflation rates that $200k will be worth at least $100k actually, in 70 years.....)
Look, the idea that every kid gets $1k in some market pegged fund is a nice one. On the other hand one might see it as a locked-in-never-stopping annual $50bn subsidy to the financia
How about companies paying tax...... (Score:2)
It is so easy... (Score:2)
It is so easy to spend other people's money.
Really, that's all this is. Hey, we big companies can't be bothered to pay all of our employees enough to support their families. Let's lobby the government to spend taxpayer money.
The article argues that this is actually all about companies wanting to provide super-duper benefits to their employees. If that's true, there is absolutely nothing stopping them from funding children's accounts all by themselves. They won't, though. What they actually want, is the ab
in a surprise twist (Score:2)
how is that not communism ?
(aka the state starts owning the means of production) ?
Not much considering inflation (Score:2)
Fucking immoral. (Score:2)
As long as these companies try and succeed in dodging paying taxes i consider it fucking immoral to make funds for the children of their employees.
Where is this money comeing from? (Score:2)
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To average a return of 7% you have to avoid the once every 7 year (on average) crash, and you also need to account for inflation. This would vastly reduce the $167000 carrot.
By the time they're old enough to spend it that $167k wouldn't be worth diddly squat anyway. For example, lets just run a quick simulation with $5k to get a decently large balance... 7% annual compounding with 3% inflation gets us:
Ending balance $569,946.96
Buying power of the end balance after inflation adjustment $71,982.80
Yeah you're not going to retire on $72k today, and even if we do a simulation where the government contributes $1k annually as well:
Ending balance $2,184,081.14
Buying power of
Re: (Score:2)
Actually, 7% is including the crashes. Otherwise, it'd be 10% or more. If you're expecting to invest for 60+ years before pulling it out, you can expect a LOT of crashes, and recovery from said crashes. To the point that you just shrug and carry on during them.
For that matter, depending on timeline, that 7% can also include inflation, though perhaps 6% would be better for that.
https://www.nerdwallet.com/art... [nerdwallet.com]
Re: (Score:2)
That 10% figure is very dodgy as the membership of the S&P 500 is dynamic and self selecting. So if you buy individual shares and a company goes bust it disappears from the S&P 500, but that index is not affected. OK so the answer is an index tracker.
Re: (Score:2)
Okay, I think you have a misunderstanding then. The 6-7% a year (depending on exact assumptions) always assumed that you were investing in the "total stock market".
Yes, that means that you'd most likely be investing in an index fund, in order to automate tracking the index. I'm not entirely sure how they decide how much to invest into which. It might be something as simple as "attempt to keep the dollar holdings for each company the same", but that would have you over-investing in the smaller companies (