Far Right falsehoods #1

                 1. Privatization of Social security is a good idea.

        Not long after his second inauguration, and in fact, as a talking point for years previous,  President George W. Bush had advocated the privatization of Social Security. Following his successful 2004 reelection campaign, he again designated fundamental Social Security reform as his top domestic priority, with Karl Rove as his mouthpiece. This was not an impulsive decision. As early as his 1978 congressional race, Bush had  suggested that the Social Security System could not be sustained unless individuals were allowed to invest the payroll tax themselves. Overriding the doubts of some political advisors, he raised the issue while announcing his first (2000) presidential race, declaring that "We should trust Americans by giving them the option of investing part of their Social Security contributions in private accounts." Mitt Romney and Paul Ryan have voiced similar opinions in 2012.

        The subtext and a typical Far Right tactic, is to infer that the present system somehow "doesn't trust" citizens, an assumption which resembles science fiction in its stretch of reality yet is guaranteed to appeal to some percentage of the public. Bush cited  fiscal and demographic pressures moving the system toward eventual bankruptcy. (unless other far more reasonable and safe changes, which didn't involve privatization were taken, an omission of convenience). He listed some basic principles and then reached the nub of the matter: "As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers. And the best way to reach that goal is through voluntary personal retirement accounts." This approach, the President argued, would offer younger workers a "better deal": The rate of return would be higher than in the traditional system; the accumulation could be passed on to children and grandchildren; and "best of all, the money in this account is yours, and the government can never take it away."

        At this point, note the thinly veiled scare tactic regarding the government "taking it away!"  Fifty years previous, then President Dwight  Eisenhower, himself a Republican,  had spoken re:   the sanctitity of Social Security (abbreviated SS for brevity hereafter).  He said, "Should any political party attempt to abolish social security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes that you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or businessman from other areas. Their number is negligible and they are stupid."  He could well have been describing the 2004 occupant of 1600 Pennsylvania Avenue, inasmuch as privatization  represents a tentative first step in that direction!

        Enough posturing,  however, what really is wrong with privatizing SS? Let's start with the myth that  private corporations can manage more efficiently than a government entity. Look no further than  Canada for an example and contrast. Canada manages their entire national health system with just about the same staff as Blue Cross uses in Massachusetts!

        Private accounts implies one of two scenarios, both with serious drawbacks.

        The first - that those choosing to use private accounts would be free to  have their money sent to any investment firm, then chose and use any vehicle that struck their fancy. Assuming they had the entire gamut of markets available, that could well mean that US funds (SS sent to investment houses) were invested in foreign markets. It also could well mean that some Americans, led on by persons like Bernie Maddoff  ended up defrauded  out of their money, or in the event of a collapse  such as occurred in 2008.  Upon investigation the U.S. Senate's Levin–Coburn Report yielded the following  opinion,  concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street" and concluded that the financial crisis was avoidable and was caused by "widespread failures in financial regulation and supervision," "dramatic failures of corporate governance and risk management at many systemically important financial institutions"  And Bush wanted to trust what would surely be billions of dollars in SS money to this gambler's paradise?   Why not just let 'em go to Vegas. Of course  the corporate gamblers, indicted in the above  Senate committee opinion were bailed out as "too big to fail," multi-million salaries and bonuses unimpaired by their greed induced failure.

        Want a real world example? Ok assume that in an alternate universe with privatization of SS a middle class wage earning family chose what would normally  be considered a really safe investment plan, using any of  numerous major financial companies' annuity plans. in 7 months in 2008, they could have watched their conservative investment choices lose 54% of their pre crash value. Tough, huh? For the next year they would have watched their financial fortunes hover below 65% of pre-crash value, while their neighbor on SS received full benefits. If this family picked January 2008 to retire, they might really, really rue that decision by year's end. Doing the math, for example, and assuming a pre crash private annuity account (Vice SS) of  $500,000  the return per month for (25 years certain and remaining funds yield 5%) would be $2922 monthly. Post  crash, the same starting value would have dropped almost overnight (weeks, actually)  to $230,000, with a  monthly payout (same terms) of $1344, and even if markets rebound, this figure is whatever it was when annuitized even if  markets rebound! Social Security is a guaranteed benefit plan, private investment is a guaranteed contribution with no guarantee of return.

        The second concern is that instead of allowing investment  with the tax payer's  choice of financial firms, the government might specify which firms or which types of investment were  allowed, to the exclusion of others. How many lobbying bucks do we thing might flow to assure being one of the chosen firms? This is an open invitation to corruption. Finally, even if the investment were something as prosaic as money market funds tied to the Federal Funds or T bill rate, the yield would actually (over the last 4 years) have lost money when inflation is taken into account.

        Here, instead of hyperbole, are some real numbers. Among current workers and retirees, the rates of annual return varied by about two percentage points - from a high of 6.52 percent (for single-earning couples born in 1920) to 4.52 percent (for their counterparts born in 1985).  Remember, Social Security is the most reliable investment in town. Try finding a CD paying 4.2% - guaranteed for as long as you live!

        Of course the dirty little "oh by the way" is that every dollar risked in private investment is one less dollar in the pool for those who choose (and will truly need) the surety SS currently represents. The real winners in any serious privatization of SS would be the same gang of corporate opportunists responsible for the 2008 crash!  In closing,  just one question.  Have you ever heard anyone espouse privatization who has any chance of actually needing Social Security when they retire? I didn't think so.