It continues apace, promising misery and hardship for tens of millions of Americans in the years ahead; economist Dean Baker has some pertinent analysis:
[T]he Bush plan would require a large reduction in the benefits provided by the existing system. A worker who is 20 today would see a cut of approximately one-third in his or her retirement benefit, although workers would theoretically more than recoup this loss by investing a portion of their Social Security taxes in a private account.
The President's main pitch is that these accounts will yield higher returns than Social Security does. The pitch also includes rhetoric about the accounts being "your money," and giving every worker a stake in the "ownership society." These claims are mostly bad math, faulty logic and deception. Advocates of private accounts assume that the stock market will give the same returns in the future as it has in the past, even though price-to-earnings ratios in the stock market are far higher now than in the past, and the Social Security trustees project that profits will grow at about half the rate they did in the past. None of the proponents of privatization have yet passed the "no economist left behind test," which asks them to show the set of dividend yields and stock price increases that add up to the stock returns they assume in their analysis.
Private accounts also have high administrative costs. According to Bush's Social Security Commission, their private accounts will cost about ten times as much to administer as in the current system if they're handled through a single government-managed system. If Wall Street gets its hands on this money, with everyone going to his or her local bank or brokerage house--as is the case with the privatized systems in England and Chile--the costs could be thirty times as high as the cost of our Social Security system [Leiter: that, of course, is the entire point!]. When the administrative costs are combined with real numbers on stock returns, the individual accounts will provide no better returns on average than the government bonds currently held by the Social Security trust fund. The accounts just add risk--individuals may invest poorly or retire during a market downturn, leaving them with much less money than they'd have under the current system....
Of course, the only reason anyone is even talking about cutting benefits and privatizing the program is that the right has managed to convince the public that Social Security is on its last legs. For more than two decades they have spread stories about the baby boomers bankrupting the system and multitrillion-dollar debts left to our children and grandchildren. In reality the program can pay all scheduled benefits long past the boomers' retirement. According to the Social Security trustees report, it can pay full benefits through the year 2042 with no changes whatsoever. The nonpartisan Congressional Budget Office puts the date at 2052....
Social Security is the country's most important and successful social program. It provides a large measure of economic security to the whole country, uniting the interests of the poor and the middle class. The program not only keeps tens of millions of retirees out of poverty, it also provides disability and survivors insurance to almost the entire working population. More children receive benefits from Social Security than from the Temporary Assistance to Needy Families program (the revamped welfare program). Social Security is also extremely efficient and has a minimal amount of fraud and abuse.
It's a hugely popular program. Close to 90 percent of the public regularly affirms that we spend either too little or the right amount on Social Security. While polls also show majority support for private accounts, that's only when the question is asked, Would you like a private account? When the real-world question, Would you like a private account if it means a cut in your Social Security benefits? is asked, substantial majorities say no.
This is one of those cases where there really aren't "two sides" of the issue that have equal epistemic merits; there is the truth, and then there are the lies. You can guess which side the right-wing is on, of course. I've even talked to earnest and otherwise intelligent law professors who've been suckered by the Social Security scare stories. The "big lies" keep getting bigger....
UPDATE: Reader Barry Lam recommends Dean Baker and Mark Weisbrot's 1999 book Social Security: The Phony Crisis; he notes that it "is highly readable and required reading even today. I have yet to see any successful refutation of their points." How could there be? The crisis is phony, and only the ignorant or the dishonest claim otherwise.
Recent Comments