December 21, 2004

More on Secial Security

Alan Elsner of Reuters makes the nuclear historical comparison, and notes that the public already opposes the idea of throwing Social Security to the stock market by a 50 to 38 margin according to a Wall Street Journal/NBC News poll:

WASHINGTON, Dec 21 (Reuters) - A decade after President Bill Clinton's ambitious scheme to overhaul U.S. health care turned into a political debacle, some are wondering whether President George W. Bush's Social Security plan could go the same way.

...[Massachusetts Institute of Technology economist Peter] Diamond said most Americans were not yet aware that the Bush plan would need to include a reduction in benefits, since the President has completely ruled out raising payroll taxes. "When it becomes understood that there are benefit cuts, the public won't like it. For a long time, polls have made it clear that Americans support increasing taxes to avoid reducing benefits," he said. ...

Richard Cohen writing for the Washington Post writes about the new solution in search of a problem:

...Similarly, to ensure that Americans approaching retirement will get the benefits they were expecting and at the same time divert money into personal retirement accounts, about $2 trillion will be borrowed. For some reason, this additional debt will not become a burden to any one of us nor, for the same mysterious reason, will it affect interest rates or be noticed by the very people who have been driving down the value of the dollar. This is as certain as finding weapons of mass destruction in Iraq.

I do not want to belabor the analogy to WMD, but really it is almost impossible to do so. The same exaggerations, false claims of crisis and ideological fantasies -- $2 trillion in additional debt simply not mattering is the functional equivalent of U.S. troops being welcomed by ecstatic Iraqis -- are being seen once again. A president who wanted war with Iraq no matter what now wants to overhaul the Social Security system no matter what. Last time, I raised my hand and enlisted. This time, it's staying on my wallet.

Also writing in the WaPo, Allan Sloan has his own concerns, though at various points he's a little too willing to overlook his sounder conclusion to wonder if private accounts might work:

...Bush talked about Social Security being a $10.4 trillion problem. That's how much money you'd have to give Social Security today for it to continue paying benefits indefinitely under its current formula. But the shortfall in Bush's Medicare drug program is $17 trillion. In other words, the problem that Bush himself created a year ago is two-thirds again as large as Social Security's problem. What's more, the drug plan starts costing taxpayers big bucks just a year from now, in 2006. We'll borrow it, of course. Social Security, for all its flaws, will take in more than enough cash to pay for itself for a dozen years even if nothing changes. So which is a "crisis"? A $17 trillion problem that starts next year, or a $10.4 trillion problem that starts in 2018? You don't need a math genius to answer that question.

...Bush would put a big hole in the Social Security safety net at the very time that corporations are doing the same with pensions. Companies are dumping "defined benefit" pensions based on salaries and replacing them with plans that force employees to bear the risk of investing successfully. If we hadn't had a bull market spanning an entire generation, no one would dare propose letting tens of millions of unsophisticated investors risk Social Security money in the stock market. The bull, born in 1982, died almost five years ago, but fond memories of it linger. ...

Landon Thomas of the New York Times points up the Wall Street angle:

...There are signs, however, that the industry is becoming a little more aggressive in pushing for private accounts, through a loose assemblage of trade associations, business coalitions and conservative research centers. These groups have lately begun trying to raise money from business interests and to marshal support on Capitol Hill, while also seeking to deflect criticism that Wall Street is behind the move simply to reap rich rewards for administering the accounts.

The first salvo was launched by the Securities Industry Association, which recently issued a research report arguing that the private accounts would not be a financial bonanza for Wall Street. In the paper, the association calculated that firms would collect at least $39 billion in fees, and perhaps considerably more, from managing such accounts over the next 75 years. But the group noted that the fees charged would be significantly below the fees that investment firms receive these days from low-cost mutual funds.

...The Investment Company Institute, the lobbying arm for the mutual fund industry, has not endorsed private accounts nor has it lobbied Congress on the matter. But while its members are reluctant to speak out publicly on the topic, the institute recently hired as its communications director F. Gregory Ahern, a former executive at State Street Corporation in Boston who was involved in that firm's aggressive lobbying effort for private accounts during the late 1990's.

Behind the scenes, the Alliance for Worker Retirement Security, a business coalition advocating private accounts, has begun meeting with Congressional and White House staff members, pushing the idea that private accounts are not only good for the country but also good for business. ...

The Alliance for Worker Retirement Security. Well, huh. Then Robert Scheer, writing in the LA Times writes about the GOP's sabotage of Social Security, saying that it's the main reason why the elderly are no longer the poorest class of society, and also why many families can enjoy caring for elderly relatives without being crushed financially. However, this bit was especially on target:

...That's why, after seven decades of unmitigated success in protecting seniors from the vagaries of market forces, the White House now wants to turn Social Security itself over to the vagaries of market forces. The conservative mantra, whether it comes to energy policy, war in Iraq or education, is to siphon public money into the private sector whenever and wherever possible, through such gimmicks as agribusiness subsidies, school vouchers and the hiring of private mercenaries.

Greed perfectly meshes with ideology in the Republican Party, and the attempted sabotage of Social Security is just another example. While the followers of Milton Friedman talk about the free market in religious terms, Wall Street is slavering at the possibility of one of the biggest potential windfalls in human history if the Social Security spigot is turned its way. The attendant investment fees alone would be enormous certainly higher than the minimal 1% overhead costs the current Social Security system consumes.

What's astonishing is that despite the recent spate of abrupt corporate bankruptcies and Wall Street corruption scandals, the president would have us believe only stockbrokers can save Social Security, and the stability of the entire fund would be tied to a stock market that has been known to tank now and again. Further, even the president's key advisors admit that the short-run cost of "privatizing" Social Security would add trillions of dollars to the Bush legacy of federal government red ink. ...

So far, it looks like the press is starting to show up for this fight. Let's hope it stays that way, because our leaders of the loyal opposition need all the backing they can get.

Posted by natasha at December 21, 2004 12:27 PM | US Politics | Technorati links |


Permanent Defense is reporting:

Unconfirmed reports from the Democratic Party say that Democrat Christine Gregoire has triumphed over Republican Dino Rossi by eight votes, thanks to the recount in King County. King County finished its recount yesterday and will officially report at 3:30 PM tomorrow. Both political parties, however, were given information early.

The State Chairman of the Democratic Party said: "We're confident Christine Gregoire has been elected the governor of the state of Washington...I believe Dino Rossi should concede."

This means that Gregoire is the winner, with or without a ruling in her favor tomorrow by the state Supreme Court on the fate of 723 ballots which the Republican Party is disputing because it doesn't want them counted.


Posted by: John D at December 21, 2004 11:29 PM