The SanityPrompt

This blog represents some small and occasional efforts to add a note of sanity to discussions of politics and policy. This blog best viewed with Internet Explorer @ 1024x768

Monday, October 11, 2004

Issue of the Day: Social Security

Between now and Wednesday I want to address some key domestic issues that are likely to come up in the domestic policy debate and discuss the way that Kerry should talk about them. First up, Social Security & Privatization.

This is a bad idea whose time has passed. There are so many things to say against this proposal that's its hard to know where to begin.

"First, this reform would cost us a fortune because we will have to find the money top both fund the new accounts of today's workers while we continue to meet our existing obligations to retirees and those near retirement. I don't think the President wants to ask someone who is 57 and has paid into Social Security all his life to suddenly start a retirement account and try to live off of what he save in the last few years of his working life. If we hadn't squandered the surplus, maybe it could be affordable, but given the deficits created by this administration and the Republican Congress, how are we going to pay for it now? This idea will cost billions of dollars and for the President not to admit it is reckless and thoughtless.

"Secondly, private retirement accounts represent a huge administrative cost windfall for the private securities industry. Each of these private security accounts will be charged management fees from the investment industry. This is the same industry that has been charged with fraud, with lying to and misleading customers, with allowing market timers to play with other peoples investments, with urging people to buy stocks they knew were worthless. This industry has paid billions of dollars in fines. So now we are going to ask the Social Security fund to bear the cost of those fines? To support this industry? Markets work often but the advisers in the financial market seem to do everything they can to make the market for financial advice as dysfunctional as possible.

"Thirdly, Social Security privatization is a bad idea because Social Security is not a retirement plan but a safety net for our seniors who may have trouble saving for retirement or who have faced some kind of personal financial catastrophe like the collapse of Enron which saw billions of retirement dollars vanish or the bankruptcies of the airlines who are now threatening to walk away from their pension obligations. There is a looming crisis in America's private pension systems that the Bush administration will barely talk about. America's employers have hugely underfunded these pension funds and not met their obligations to their employees. Now many of them threaten to stick the US taxpayer with the bill. People in this country rely on Social Security to be there in case everything else they count on isn't. To allow this money to become subject to the same kinds of investment risks breaks a promise with our seniors and our workers. Look at the risks of private investment. Look at stock market in the last five years. Social Security is a low risk retirement plan. Allowing people to invest the money privately may allow them to raise their return, but only because they are raising their risk. What will happen to those people who lose everything in their Social Security retirement account? Who is going to pay to support them in their old age? Social Security, remember is a program that came out of the Great Depression, an event that was triggered by the collapse of the stock market in 1929. It's a program designed to protect our people against this kind of catastrophe but private accounts would make this kind of event worse.

"Finally, the fundamental reason that this is such a bad idea is that it is really just an effort to destroy something Republicans have been working for 70 years to destroy - Social Security and the protection it provides to our nation's seniors in retirement. When FDR signed the bill into law, he commented on its universal aspect by saying that this would ensure its long-run viability. He recognized that the brilliance of Social Security lies in the fact that we are all covered under this program. One reason that this program survives as it has is because we are all in this together. In our current political system and environment we have enough reason to see each other as members of competing groups, to bicker and fight over government's benefits as if it were a zero sum game. By vesting us all with an interest in Social Security we stand shoulder to shoulder, united as one United States. This stands in the best tradition of our government institutions that bring us together as one people, one nation under God. The flag, public education, the draft army in World War II. No matter our differences, no matter our origins, we are all equal and all one nation. The President's proposal would require special subsidies for poorer workers. We cannot allow Social Security to become another welfare program because we know what happens to those kinds of programs in Washington. Policy makers like to talk about means testing and such for Social Security but this ignores political realities of this country. It ignores what we do to programs that get aimed at one group in our society but cost the rest of us money. Social Security is one of the finest legacies of Franklin Roosevelt because it makes us stronger as a nation and as a people. Most policy experts in Washington forget that. And that is not in the interests of a political party like the Republicans that depends for its political success on dividing us and reminding us continually of our differences. Pitting white against brown, rich against poor, north against south, straight against gay."

Kerry likes to talk about the administrative cost argument. I think the key is not to lead with the administrative cost but to break the overall argument into four key components. Next - Health Care