Today Bush staged a photo op at the little known Federal Bureau of Public Debt to make a point about Social Security. The thrust is that the Social Security trust fund is, in reality, merely a file cabinet full of IOU’s. Every now and then the privatization forces trot out this old turkey and other have done a better job than I could of debunking their claims. That said, I’m going to try and point out how completely ridiculous those claims are.
First, as any Heritage Foundation lackey will admit, the SS trust fund, like all US Treasury IOU’s, is backed by the, “full faith and credit of the U.S. government.” If Bush were actually proposing the US government, heretofore the safest investment in the world, default on a loan the consequences would be enormous.
This is why the whole project is so sleezy. If Wall St. and foreign investors believed that the United States is preparing to stiff its creditors, there would be a rush to pull money out of the US government and a major financial crisis for the markets and the government. But that’s not happening, even though the president has told us in no uncertain terms that when your Social Security check is supposed to come, the government will send you a default notice instead. Why isn’t Wall St. panicking? Why aren’t the Japanese rushing to divest of the dollar? Because they believe, and are willing to bet large sums, that Bush is bluffing.
And here’s why the tactic is stupid. Because in modern America, most of us have our money held up in IOU’s from the bank. I don’t think I’ve ever had more than several hundred dollars in my possession at once, yet I’m fairly certain the money isn’t about to go away any time soon. A file cabinet full of IOU’s just aren’t as viscerally scary as the president would like.
And here’s a reason to be outraged. If, as the pres sez, the trust fund is empty because, “government spent it.” Then can’t it be argued that government, of which Mr. Bush is presently the leader, gave it away in tax breaks? A couple years ago Bush looked at the budget forecasts and said to himself, it is more important to cut taxes than to honor the debt to American seniors and future seniors. He’s telling us some guy named George W. Bush spent all your retirement money and if I see him I’ll let you know. Laughable.
Any thoughts?
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6 comments:
to a person who supported invading iraq but not for the administration's primarily argued reasons, the socsec debate is starting to feel like a bit o' the old redux.
i think there are good arguments for partial privatization. here are a few:
a) more people controling their own money
b) greater public interest in investment options
c) closer financial bonds between american business and american citizens
d) progressive wealth accumulation
but there are also some lousy arguments, and chief among them is the notedly abhorent imminent-crisis one. partly because it's not exactly imminent (2042, and not even then if you buy krugman's mild-tweaks solution), and partly because, as mavis points out, if bush was really worried about impending collapse, he wouldn't have sent all that cash back to us in check form.
so once again, i find myself on the side of the idiots when it comes to representing rationale for change. and once again, the dishonesty in their argument leaves the door open for the left to mount an assault without offering constructive alternatives.
just like the case in iraq, the weak arguments that say "we have to" get in the way of strong ones saying "we should."
One of the big lessons of Iraq is that there was no immanant crisis-those scary weapons turned out to be phony-and that sanctions and inspections were basically working.
So those Krugman tweaks may really be enough. SS may not need any radical changes. Especially when you consider that the estimates used by the Social Security trustees are considered by many economists to be pessimistic.
I don't believe conservatives are interested in "fixing" or even "reforming" social security. I think they want to destroy it.
Michael Kinsley months ago laid out why he thinks SS privatization won't work. He's gotten some responses but nothing that really contradicts the basic point.
I really think you've bought into some spin on this.
1. People will have less control over their own money than you think. While no Bush plan has actually been proposed, most agree that any plan will only allow investors to put money in a small array of “safe” stocks. If you lose your money or run out because you live too long then you’ll be burden on your family and/or other facets of the system. More control means more risk and since risk and debt are increasing right now – jettisoning SS doesn’t appeal to many folks.
2. Democrats have been advocating investing SS trust fund dollars in the private market. This would increase the rate of return SS moneys get while not pushing the risk on individual citizens. Republicans are against this because they don’t want government to have more power to influence markets – to punish and reward good/bad corporations.
3. A large percentage of Americans (around 70%) already invest. What are the benefits for the other, likely less-affluent, 30%?
4. I don’t know what progressive wealth accumulation is but if you mean that the left will have more money to cause trouble you’ve vastly misunderstood the point of Social Security.
sweet. now we're into it.
progressive wealth accumulation works like this:
say you're a lower class african-american male. you work your whole life and pay social security (the unprivatized version) taxes, but when you die several years before your caucasian counterparts (due to an unfortunate average lifespan disparity), the money you put into the system is spent financing the final years of caucasian women, and your, more than likely, meager estate is passed on unhelpfully to the next generation of hungry minds/mouths.
now say you had a chance, via private accounts, to accumulate some wealth from your socsec contributions. it might not be much (stocks not being as rosy as we'd like, and bush's 2-3 percent being a a relative pittance), but at the end of your last day, that money is yours. more importantly, that money can now go to your kids, who, if they're anything like you, could really use the hand. hence the accumulation, and the progressive. see?
added benefit: this generational handoff applies even if you die mid-career. then at least someone sees the money, even if it aint you.
its not the spin that entices me, its the principle. ever since i first learned about social security as a kid, it has seemed bonkers to me that the system isn't personal. the goal is to prevent poverty in old age, right? this could be accomplished much more admirably, in my view, by forcing people to set aside their own money as they go, and by helping them to stretch out that money in their old age, than by distributing one person's money to another's retirement fund. is this not the most intuitive solution? [i want to not be hungry later, so i should save more now. only i'm stupid fickle and impulsive, so the government will help me out by forcing me to save. nice of them, and thanks. but: grandma's hungry, so i'm going to pay for her dinner and not worry, cause my kid's kids will pick up my tab years from now, and the government swears it'll be just as good a dinner as gramma got? thanks but i'll take my chances with me, even if an index of stocks and bonds is riskier than a governmental, dareisayit, IOU.]
the brackets, apparently, mean that i'm engaging in in colloquial, scattershot dramalogues to make my point. but back to civilized discourse.
check out the cato plan here:
http://www.socialsecurity.org/catoplan/
i highly recommend reading the whole thing, but the summary will give you the idea.
you say that republicans want to destroy socsec, some of them may indeed. more of them, i'll betcha, would prefer to radically change it over time to a personal system from a collective one. if the system i advocated above (save your money, spend that same money in retirement) qualifies as destroying your idea of social security, then yes they want to destroy it. and so do i.
the proposed investing of government funds in the stock market strikes me as a bad idea. yes there would be punishment and reward, but maybe not always for the right reasons. political friendships and lobbying connections would get even more gruesome with large governmental stakes in corporations. additionally, the presence of a state investor with massive funds at its disposal would, it seems even to my drama degree, distort the market in wacky and possibly dangerous ways. individuals and corporate investors would take cues from government, and stocks perceived as safe could rapidly become notsosafe as demand made them overvalued, nececissating largescale gov't pullouts and collapses in companies/confidence. aside from all that, its just messy, and on more thing i don't want my government fighting about and looking after.
in a personalized system, the less affluent 30% will learn about stocks because their money will be partially invested in them. as you say, the choices will be starkly limited. but this may change with time, and even if it doesn't it may encourage the lower classes to increase their awareness of, and engagement in, investment markets.
such engagement will, in turn, increase the bonds between corporate america and citizens. on one level, this is good because greater investment can lead to greater growth. but aside from that, this connection has basically an aesthetic appeal for me. it's hard to explain, but there is something pleasing (and so, my gut says to me, inherently good) about the shape of a nation that rises and falls together. it's not just that i think people would be more pro-business if they had stakes in business success, but that's part of it.
finaly kinsley. if i were a stump-speeching republican, i would call his article fancy footwork. i'm not, so i can say that it was bright and (once i read it twice) clear. however, his issues don't deter me from advocating a long-term switch to a personal system of socsec. it's true that the government will have to borrow, or tax, large amounts of money to offset transition costs, but if the personal system miraculously prevailed (which, like an unfortunate number of my favorite political ideas, i find highly unlikely in la future forseeable), those transition costs would ultimately be irrellevant. the concept of benefit would barely even apply in a system where, gasp, it was your money all along.
I can't really stand posting as long as everything I write comes out with funny symbols litering my brilliance. A brief rejoinder to your fallacious comment regarding African Americans:
Black Americans aren't dying at 55 or 68, they're dying in their twenties. This brings down the median age of death for black folks. The ones who live past thirty live as long as whites, asians, and others. The ones who die young mostly haven't worked very much and therefore haven't paid into the system. So they aren't getting monetarily screwed by dying (maybe we could put some energy into solving that problem) and their children wouldn't get much private accounts cash.
I can't really stand posting as long as everything I write comes out with funny symbols litering my brilliance. A brief rejoinder to your fallacious comment regarding African Americans:
Black Americans aren't dying at 55 or 68, they're dying in their twenties. This brings down the median age of death for black folks. The ones who live past thirty live as long as whites, asians, and others. The ones who die young mostly haven't worked very much and therefore haven't paid into the system. So they aren't getting monetarily screwed by dying (maybe we could put some energy into solving that problem) and their children wouldn't get much private accounts cash.
point taken on the africamerican stats. but that doesn't affect my basic point: that the whole country would be better off with a system in which everyone stuck with their own money. don't we do enough redistributing on other fronts? medicaid/care? low income housing? food stamps?
maybe my point is that social security as it stands is just another tax. why not make it a dedicated personalizd money saver, and leave the socialism to the rest of our elaborate scheme?
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