Friday, September 09, 2005
Social Insecurity
There is Privatization and then there is Solvency. They are by no means the same thing, nor are they even especially related. Solvency is an economic issue. Privatization is purely ideological. Ok, perhaps some definitions are in order.
Solvency is defined as the capacity to meet all financial obligations. Privatization of Social Security is a plan where people would have the option to pay into private accounts rather than to the government general social security trust. Theoretically, these private accounts yield a higher return than the government can offer but with higher investment risk and without the guarantee of government payment. My contention is that the Administration’s current plan of privatization could, in theory at least, make social security sustainable, but that is different from making it solvent.
I will concede that private accounts would net more money than the current system and that the current system, on its current path with the current population trend is heading towards some serious financial trouble. There seem to be, however, a variety of potable adjustments that would go a long way towards fixing social security while still leaving its integrity intact.
Here is the real issue: Social Security, at its heart, is a reflection of an ideology, one that says the government should account for and provide an economic safety net for the entire American population. It has been a successful program for many years and this is its financial burden – to be a safety net for ALL Americans. While privatization could make the system sustainable, it cannot, in my opinion, make the system solvent since inherent in the added risk is the fact that a few people will lose their money. Some people will make unwise investments with their personal accounts and their Social Security won’t be there when they need it. A system in which any number of people are left behind compromises the integrity of Social Security.
Republicans and conservatives believe that many private citizens can manage their money more effectively than can the government, and the government should not stand in the way of their doing this. They believe in smaller government and individual responsibility. Privatization does not create solvency, it merely conforms to this long-held conservative ideology and is politically potable now that we have embarked on a path toward financial trouble. But this is not a final solution to the problem. It merely satisfies the conservative aching to dismantle federal programs. Social Security has done tremendous good for millions of people. Gutting it and destroying its integrity and its purpose by privatizing it when there are plenty of ways to make it actually solvent rather than just sustainable seems to me ridiculous.
Finally a short lesson in playing politics for those who want or need it: the bait and switch. Once all empirical and ideological evidence is exhausted, Social Security conversations inevitably resort to this phrase: “Well fine then, but why haven’t the Democrats come out with a better plan?”
There ARE other solutions than privatization and I am sure Democrats have a few in mind, but until Bush stops pushing privatization and Republicans in Congress take this plan off the table, offering any new solution is treacherous. Republicans in congress can pull a bait and switch. Here’s how it works. Republicans use the Social Security debate to bait enough Democrats into creating a social security fix of their own. The Democrats pass their own version of a fix in either the House or Senate (probably the Senate). Republicans then force the privatization bill through the other body (probably the House) by whatever means necessary. Once these two different versions of the bill are passed, they must go to conference, a committee made up of both Senators and Members of the House of Representatives, in order to reconcile the differences. With a Republican Majority in both houses, the Republicans can stack this conference committee with pro-privatization members of Congress thus pushing privatization through despite sufficient opposition in both houses to defeat such a bill, and all because a few Democrats were baited into announcing and authoring a new plan.
Solvency is defined as the capacity to meet all financial obligations. Privatization of Social Security is a plan where people would have the option to pay into private accounts rather than to the government general social security trust. Theoretically, these private accounts yield a higher return than the government can offer but with higher investment risk and without the guarantee of government payment. My contention is that the Administration’s current plan of privatization could, in theory at least, make social security sustainable, but that is different from making it solvent.
I will concede that private accounts would net more money than the current system and that the current system, on its current path with the current population trend is heading towards some serious financial trouble. There seem to be, however, a variety of potable adjustments that would go a long way towards fixing social security while still leaving its integrity intact.
Here is the real issue: Social Security, at its heart, is a reflection of an ideology, one that says the government should account for and provide an economic safety net for the entire American population. It has been a successful program for many years and this is its financial burden – to be a safety net for ALL Americans. While privatization could make the system sustainable, it cannot, in my opinion, make the system solvent since inherent in the added risk is the fact that a few people will lose their money. Some people will make unwise investments with their personal accounts and their Social Security won’t be there when they need it. A system in which any number of people are left behind compromises the integrity of Social Security.
Republicans and conservatives believe that many private citizens can manage their money more effectively than can the government, and the government should not stand in the way of their doing this. They believe in smaller government and individual responsibility. Privatization does not create solvency, it merely conforms to this long-held conservative ideology and is politically potable now that we have embarked on a path toward financial trouble. But this is not a final solution to the problem. It merely satisfies the conservative aching to dismantle federal programs. Social Security has done tremendous good for millions of people. Gutting it and destroying its integrity and its purpose by privatizing it when there are plenty of ways to make it actually solvent rather than just sustainable seems to me ridiculous.
Finally a short lesson in playing politics for those who want or need it: the bait and switch. Once all empirical and ideological evidence is exhausted, Social Security conversations inevitably resort to this phrase: “Well fine then, but why haven’t the Democrats come out with a better plan?”
There ARE other solutions than privatization and I am sure Democrats have a few in mind, but until Bush stops pushing privatization and Republicans in Congress take this plan off the table, offering any new solution is treacherous. Republicans in congress can pull a bait and switch. Here’s how it works. Republicans use the Social Security debate to bait enough Democrats into creating a social security fix of their own. The Democrats pass their own version of a fix in either the House or Senate (probably the Senate). Republicans then force the privatization bill through the other body (probably the House) by whatever means necessary. Once these two different versions of the bill are passed, they must go to conference, a committee made up of both Senators and Members of the House of Representatives, in order to reconcile the differences. With a Republican Majority in both houses, the Republicans can stack this conference committee with pro-privatization members of Congress thus pushing privatization through despite sufficient opposition in both houses to defeat such a bill, and all because a few Democrats were baited into announcing and authoring a new plan.
