Privatizing Social Security is an idea whose time has come, at least insofar as BushCheney is concerned. Whether this change is a good idea, however, is still very much in question as Congress considers major alternations in a program that has done much to eliminate the uncertainty and poverty of old age. For much of its history Social Security rode the crest of a demographic wave; America’s growing post-World War II war economy and baby boom provided the wherewithal to support generous benefits. Social Security reforms in 1965 gave the United States one of its greatest successes by reducing senior poverty from 25 percent to less than ten percent. As a result, Americans and their families have been largely spared the indignities of a penurious old age.
Of course, that was when the system was riding strong economic and population growth. Now BushCheney along with its echo chamber in the media and right wing think tanks are telling us that the nation cannot afford to support its elderly citizens any longer, that benefits must be reduced, retirements postponed. They say that the baby boomers will swamp the system and oppress the few younger workers who will pay the taxes to support the system. Investment returns are too low to pay for benefits. George W. Bush says that the consequences of not acting are as grave as the potential dangers of change.
With Republicans in full and complete control of the federal government, BushCheney’s privatization juggernaut is cranking up to roll. They claim that private investment accounts for younger workers will provide greater returns on investments and will give these workers control over their assets. They will become independent members of Bush’s Ownership Society. This change will preserve Social Security for existing and near retirees and create a stable system for future retirees. That is the message of the campaign for change.
I have several reservations about privatization. First and foremost, I don’t believe that Social Security is in the dire financial straits BushCheney claim. The Center for Economic and Policy Research cites reports from both the Congressional Budget Office and the Social Security trustees that show the system will remain solvent for the next 40 years or so. After Iraq, I would hope that this nation will not simply accept pronouncements from the White House without at first looking at alternate sources for critical comparison. BushCheney has a history of lying and deceit in pursuit of its objectives, I have no reason to think that they wouldn’t lie this time around. Especially when their lies have had such great success in the past.
My second reservation is, even if some Social Security reform is warranted, will BushCheney’s plan create a stable system that enables provides needed support to older Americans without imposing undue burdens on the workers who must fund the system with their taxes? I think privatization is a bad idea for several reasons. Private investment is risky. George Bush talks about greater investment returns from a privatized system but he does not talk about the risk associated with those higher returns. Higher returns are associated with risk which can mean loss as well as gain. Even the relatively safe investments can be devalued by periodic market fluctuations most recently seen beginning in late 2000 and accelerating after the 9-11 attacks. What security will be available to an individual nearing retirement if their pension portfolio collapses? Will this nation tolerate the risk of poverty resulting from poor investment choices and management? Social Security was created to provide assurance of income security in old age. Private investment cannot provide that security.
Personal control of investments is a tricky business, certainly in my own experience. I am well educated (MA degree) and informed but I am not interested in becoming an financial analyst so I must turn to a professional for assistance and for which I pay. With Social Security in its present form, I don’t have to worry about managing investments and know that it is available as a back up or supplement to the investments I do make and manage. And I pay far less than on my private accounts. On average, private investment fees are about 15 percent of portfolio value. Social Security on administrative costs are less than half that rate. After seeing how well professionals assisted me in the past few years, I don’t really want to give them a chunk of what has been a successful program so that they can create less security for older Americans .
If younger workers, or any worker, wants to invest in their own retirement, they can do so with Individual Retirement Accounts. If they are smart (or lucky) they will not by the next Enron. Expanding investment opportunities in this direction will allow individuals to develop a personal stake in their retirement savings and at the same time increase this nation’s’ woefully low rate of savings. Other options are also available, such as removing the cap on wages subject to Social Security payroll taxes or developing long term strategies for coping with demographic fluctuations.
To a large degree, the “crisis” surrounding Social Security depends upon definitions and assumptions. Conservative analysts and Bush Administration zealots are using the most dire definitions and predictions to terrorize Americans into accepting privatization as the only solution. (Does any of this sound familiar?) However, other credible projections suggest that the system is more financially stable than described. Bush is right that America needs to review this important program to ensure its continued stability. He is wrong to claim that privatization is the answer. What this nation truly needs is an honest debate and discussion about Social Security.
That’s the last thing BushCheney want to hear. As with Iraq, they have already made up their mind.