TownHall.com Charles Krauthammer (archive) June 24, 2005
WASHINGTON — What has happened to the Democrats over the past few decades is best captured by the phrase (coined by Kevin Phillips) “reactionary liberalism.” Spent of new ideas, their only remaining idea is to hang on to the status quo at all costs.
This is true across the board. On Social Security, which is facing an impending demographic and fiscal crisis, they have put absolutely nothing on the table. On presidential appointments — first, judges; and now ambassador to the United Nations — they resort to the classic weapon of Southern obstructionism: the filibuster. And on foreign policy, they have nothing to say on the war on terror, the war in Iraq or the burgeoning Arab Spring (except the refrain: “Guantanamo”).
A quarter-century ago, Daniel Patrick Moynihan noted how it was the Republicans who had become a party of ideas, while the Democrats’ philosophical foundation was “deeply eroded.” But even Moynihan would be surprised by the bankruptcy in the Democrats’ current intellectual account.
“The Democrats have no ideas” on social security. What a despicable piece of misinformation that is. Of course the Democrats have an idea about social security: First, don’t destroy and dismantle social security by looting its trust fund to pay for risky private accounts with massive administrative costs. Second, don’t turn it into a welfare program for the poor by indexing it’s benefits, but protect its guarantees for the middle class as well. Third, shore up its finances by increasing the amount of income that can be taxed for social security, not by redcing benefits.
We face a much larger and more ominous deficit in the federal budget than in social security. The social security deficit is $3.7 over 75 years and won’t begin to be felt until 2043. The federal budget deficit is forecast at $2.6 trillion over the 10 years beginning in 2001. Compared to the $3.7 social security deficit over the next 75 years, the cost of making the 2001 and 2003 tax cuts permanent is $11.1 trillion. So by cancelling even half of the Bush tax cuts we could easily make social security solvent. Let’s not forget Medicare. It’s finances are much more dire than those of social security and were made much more so by the bait and switch Medicare drug benefit, originally pegged at $400 billion but now said to cost twice as much.
Basically Republicans want Democrats to sign on to dismantling and destroying the most successful government program ever, and placing millions of elderly Americans at greater economic risk. Am I supposed to be upset that the Democrats won’t go along?
Frankly, I would like to know why a web site purporting to represent Christianity runs an article advocating the dismantling of a successful program that provides economic security to millions of vulnerable elderly. How does increasing poverty and misery among senior citizens by dismantling the social security program advance the cause of Christ?
Note 3 OH PULEEEZE
Dean, your comment amounts to presumptious, ill-informed scare-mongering. The Social Security issue is a very serious matter. It is complex and has many ramifications for today’s economy and the future. For you to launch a simplistic diatribe against anyone who would discuss needed reforms is absurd. There are many sincere people of good faith who are looking for solutions to this difficult problem. There are no easy answers. Anyone who comes forward with a solution makes themselves a target.
Secondly, I vigorously reject and resist you PERENNIAL VICTIM STATUS claim for the ELDERLY. Economic growth, social security and other programs in the United States have greated reduced poverty among the elderly. If you really cared about EQUITY in taxation you would help do something to stop the massive transfer of wealth from the younger generation to the well-to-do older generation. Simply because someone has reached retirement age does not make them HELPLESS DEPENDENTS on the rest of society. Your approach would encourage people to equate RETIREMENT AGE with HELPLESS DEPENDENCY. As always, you need your helpless dependents to give your massive government something to administer.
This is proof positive that you equate PLATFORM OF THE DEMOCRATIC PARTY===CHRISTIANITY. You really do identify your socialist viewpoint as consistent with Christianity. Ridiculous. Of course, when it comes to social security there doesn’t seem to be a clear platform advanced by the Dems unless you call “full steam ahead over the edge of Niagara” a platform.
I will grant you that the Krauthammer does discuss social security and national politics, I have noted that in many other contexts on this blog, you have been the first to inject divisive political comments into what otherwise would be purely theological discussions.
What article advocates a “dismantling” of Social Security?
Fr. Hans, as usual Dean has taken the knee jerk Democrat position as gospel. Any attempt to move Social Security into private accounts is ?dismantling? Social Security. After all as John Kerry said in one of the Presidential debates, nothing needs to be done to Social Security, there is no problem.
You know, all the talk on the Left of social security reform is “scare and terrify” the public, particularly the vulnerable poor. Social Security was legislated at a time when the country was facing the crisis of the Great Depression, and it was one response to the misery of the poor elderly. All in all, the program ( really, an insurance annuity program) has served the country reasonably well.
We have, however, the possibility of making some incremental changes in the program by allowing younger workers to invest in private investment accounts. I see this as a great opportunity for people to increase their net wealth by putting aside a small portion of their income into governmentally regulated retirement savings investment plans.
Many Christians are plainly naive about economics. Various church policy statements lean heavily on a left-of-center view of economic thinking. Churchmen like to believe that the state should be totally responsible for the care of people. What a politically naive belief! Moreover, those who make such policy pronoucements, evoking what amounts to speaking “ex cathedra,” are made by those who are already well-off. No suprise that church officials in many denominations make a darn good living and do not have an inkling how most Americans live. For all the rhetoric about freedom of choice among mainliners, it is beyond them that people should have the right to choose their choose investment instruments that would secure their futures and produce wealth for their families.
What is in opposition to Christ is economic and political thinking that would put the fate of people in the total hands of the state. I have no problem with maintaining a governmentally sponsored safety net for people, but I for one do not think it is wise or virtuous to simply trust the state in knowing what is best for us.
Put another way, I do not believe there is a Christian economic theory. There are models that are more or less beneficial to society as a whole. Some would see socialist theories as more in line with Christian charity. This is far from the truth. Even the early church in Jerusalem, who banned together pooling all of their money and resources, finally had to ask St. Paul for help in bailing them out when times were tough. I seem to recall that Paul worked for a living and paid his own way. What a model for Christian living!
George
Note 5 Hysterical Language over “Millions of Vulnerable Elderly”
Immediately after WWII the age group with the highest incidence of poverty were the over 65 group. Since WWII the elderly (as a group) have one of the lowest poverty rates of all age groups. What happened? Well, our economy grew and prosperity spread among the entire population lifting people in all age groups out of poverty AND the United States instituted one of the largest redistributions of wealth in the history of the world. Social security has effectively shifted massive amounts of wealth from the young to the old regardless of need. The program was sold to the pulic as a RETIREMENT SYSTEM not a SOCIAL WELFARE SYSTEM so need was not accounted for. This was accomplished because the young are oblivious to the effect that politics has on their personal economic interests and they generally don’t vote. The elderly by contrast have been very effective political mobilizers.
Note Dean’s tear jerking description “millions of vulnerable elderly.” The fact of life in America is that a very large share of elderly are NOT poor. The day is over when being over 65 meant that you had a high chance of being poor. These days the group with the highest poverty rate is the young, 18 to 35.
However, Dean’s socialists world view requires victims—helpless, vulnerable, eternally dependent victims— so the elderly are now equated with “the poor” regardless of the economic facts (in his mind). Since Social security was sold as a RETIREMENT SYSTEM not a SOCIAL WELFARE system, there was supposed to be a rough corelation between what a worker paid and what they later collected. That corelation isn’t evened remotely balanced anymore. Current retirees are taking far more out of Social Security than they ever paid in, even with modest investment gains factored in.
Private accounts have many benefits. First, it protects the investment of the worker. Virtually everything I have paid in over the years has ALREADY been spent on TODAY’s RETIREES. Secondly, under the latest proposals, participation is voluntary and funds can be invested in conservative investmetns just like 401K plans. I wonder if Dean thinks that his 401K plan is a wildly speculative investment. Bet not. If Social Security is supposed to be a RETIREMENT plan rather than a social welfare plan, then I see no reason why I cannot be trusted to invest my own money if I choose after signing a waiver stating that I understand what I am doing.
One of the clear reasons that Dean opposes any discussion of private retirement accounts is that he cherishes Social Security in his socialist heart as a welfare program. It stands as an immensely powerful tool to tap the income of workers. Remember, right now, the government takes a hugh chunk for income tax and another huge chunk for social security. Many people in America pay more than 40% of their income to these two funds, that does not account for further taxation such as real estate tax, sales tax and taxes on automobile licenses and permits.
Missourian writes: “I wonder if Dean thinks that his 401K plan is a wildly speculative investment.”
I think you should contact some former Enron employees and ask them how their 401Ks are doing. Also, that loud sucking noise you hear in the background is the sound of $10 billion of United Airlines pension benefits swirling down the drain. All sorts of things can happen on the way to retirement, and there are a lot of folks who will be glad Social Security is around.
“Here’s a cautionary insight. At Fidelity and Vanguard, employees have 401(k)s, of course. But Fidelity also provides a pension program, and Vanguard contributes 10% of its employees’ salaries to a retirement account that is separate from any 401(k). For the welfare of their own employees, two of the most important 401(k) providers don’t rely on the 401(k) alone.”
http://www.fastcompany.com/magazine/64/401k.html
Missourian: “This was accomplished because the young are oblivious to the effect that politics has on their personal economic interests . . . I see no reason why I cannot be trusted to invest my own money if I choose after signing a waiver stating that I understand what I am doing.”
So on the one hand young workers are so dumb that they don’t understand that massive amounts of their wealth is being redistributed to the elderly. On the other hand they are so smart that they should take over the administration of their own retirement plans.
Note 8 Retirement Issues: Enron
The Enron employees who were hurt were those who put all of their investment in one stock. This violates the primary long-term investment principle: diversify and do not put more than one-tenth into any given stock or better into any given sector of the economy. The failure of Enron would not affect the value of stocks held in other companies or money invested in government bonds.
Note 8 Young People and Retirement. Philosophical Difference: Citizens as Children/Government as Caretaker OR Citizens as Adults/Government as Servant
Adults have freedom that children lack. The freedom an adult enjoys in a healthy society is conditioned on a) abiding by the duly enacted laws of society b) respecting the rights of other and c) accepting the consequences of their actions.
A child has the legal benefit of being protected. A minor cannot enter into a binding contract without the consent of his parent. Children are not held to the same standard of criminal liability. But, of course, we know that children do not enjoy the same freedom as adults. Adults can, and do, decide where a child attends school and everything else about the child’s life.
You have made a good point. Many young people are cavalier about retirement issues. They shouldn’t be, it is not in their best interest. You will remember that they organized quite effectively about issues they cared about–the draft in the 1970’s for example. So when young people care, they are perfectly capable of being effective politically. If they don’t care why should you?
Everything in Dean’s political writing posits a PARENT GOVERNMENT and a CHILD CITIZENRY.
Take his comments about “vulnerable elderly.” I pointed out that as a age group the “elderly” have done very well in the United States. It is no longer true that being “elderly” necessarily meant being poor. No matter. Dean has found another group to INFANTILIZE. In Dean’s world no adult is ever held to live with the consequences of his or her deicsion, society must rescue everybody from the bad decisions they have made. Not only must society rescue people from the bad decisions that they have made SOCIETY must ABSOLVE THEM FROM RESPONSIBILITY.
Note 8: Social security is an inter-generational redistribution program, not a retirement program and not a social welfare program.
Social Security is not a RETIREMENT PROGRAM because the contributions of workers are not protected. Let me repeat that. Social Security is not a retirement prgoram because the contributions of workers are not protected. There is no law or legal principle in force in this country that ensures that I will get back the money that I have paid in social security. Congress is legally free to reduce or eliminate benefits prior to the point where I retire. I have no guarantee they won’t do just that.
Social security is not a WELFARE PROGRAM.. Contributions are collected with a regressive tax. Payouts do not reflect need.
Social security is an income redistribution scheme in which the old are given a share of the wealth of the young, period.
Neither President Bush, nor have any Republican, offered a social security proposal that actually strengthens the program. Rather they have offered proposals that weaken the fiscal strength of the program and/or fundamentally alter it’s original design in a manner that significantly reduces the scope of benefits and universe of beneficiaries. One can only conclude therefore that the objective of the Republicans is not to save the social security program, but the fatally harm it as part of their war on the middle-class.
First, how urgent is the threat to the program’s fiscal solvency? In terms of timing and dollars, it is less urgent than the accumulated deficits in currrent federal budget over the next 10-20 years, and less urgent than the threat to the fiscal solvency of the Medicare program. So why don’t we truy and solve these first? According to program actuaries, the social security program will begin running out of funds in 2043, 38 years from now and even then will have enough money to meet 75% of it’s obligations.
Second, both methods proposed by the Republicans to finance private accounts cause significant harm to the program’s finances. Using funds currently in the trust fund will hasten the insolvency of the program by several decades. Borrowing the money would add additional trillions in additional red ink to our already bloated national debt, harming the economy, swelling interest payments and weakening our increasingly Argentina-like economy even further.
Third, the solvency of the program can be maintained by less drastic means. First increasing the amount of income that can be taxed for social security would extend the solvency of the program by several decades. The cost of making the program entirely solvent for the next 75 years is less than half the amount of the revenue shortfall created by the 2001 and 2004 Bush tax cuts.
How can a Christian say that protecting Paris Hilton from the inheritance tax is more important than protecting millions of vulnerable elderly from destitution? ANSWER THAT!
Fourth the economic forecasts used by Republicans to justify their proposals are fraudulent. If the rosy economic projections used to estimate that beneficiaries would collect more from private accounts than traditional social security are true, than the economy will also produce enough revenue to keep traditional social security solvent. If the dire economic projections used to estimate that traditional social security will go broke comes true than private accounts won’t perform well either.
Michael, and Missourian: I respect you very much, but you didn’t respond to the substance of my remarks, rather you attacked me with labels like “socialist”. I wish you would respond to the substance instead, because really I have not seen anything that suggests that any of these social security proposals can do anything but harm the weakest of our neighbors whom Jesus Christ our Savior, instructed us to protect.
PS: Sorry it took me so long to respond. I was traveling all day yesterday.
Missiourian,
You wrote, “One of the clear reasons that Dean opposes any discussion of private retirement accounts is that he cherishes Social Security in his socialist heart as a welfare program.”
This confused me. Your other posts show that you entirely grasp the nature of Social Security as a redistribution scheme, but the above quote makes it seem as if you favor private accounts. I am not sure how that could be, since you seem to be concerned about the power that Social Security already posits in the hands of the Federal government.
Currently, United and other companies are turning over their pensions to the Pension Guaranty Benefit. In exchange for assuming this obligation, this wholly-govenment owned ‘corporation’ will be assuming a hefty chunk of ownership of UAL. That’s right – the government will own around 40% of the stock of an airline.
Care to compete with that in the private sector?
What do you think, will the government allow UAL or any other similarly situated company to go belly-up, or will the government continue to pour in bail-out money to prevent having to write-down their investment to zero?
Now – multiply that by a factor of 100 for what will happen if Social Security money is in the stock market. Would the federal government allow a major member of the S&P 500 to lapse into financial distress, knowing that such an event would hurt SS private accounts?
On the other side, being added to the S&P 500 is already a major kick for any stock because of the number of funds that are required to rebalance everytime the index changes. That major stock boost is a big competitive advantage. It can provide the cash and stock necessary to acquire rivals and dominate a market.
Now imagine that a chunk of Social Security money follows the S&P 500. Being added to the index will be like winning the lottery as captive money flows into your coffers.
On the downside, if you are removed from the index, your stock is likely to sink straight down to Hades.
Or, what if the Feds decide that Social Security money has to come with strings attached? Social responsibility clauses? How about a workforce diversity clause? How much social engineering do you think the Feds can buy with your private account?
Do you see where I’m coming from? Social Security is already a poweful enough lever, don’t hand the Feds any more power under the guise of helping retirees. They have enough already.
If this is about solvency for this Ponzi Scheme, then raise the cap on taxable wages about $120,000, or means test the program, or do something else that will not increase the control Washington has on our economy. On the other hand, if the idea is to make Washington even more involved in business decisions and capital markets in this country – then by all means let’s have ‘private accounts.’
Perhaps my conservative friends are motivated by a sincere belief that private accounts could actually help retirees. Unfortunately we have seen no credible proposal by President Bush or any Republican that would actually our seniors or the nation better off than they are under the present system.
I say that Republicans favor dismantling the system because every one of their proposals would weaken the finanacial solvency of the program, by more rapidly drawing down the social security surplus, while dramatically lowering payments, by reducing both the universe of beneficiaries and scope of benefits.
Republican claims that private accounts would produce more revenue for retirees than the present system is based on a number of frauduleny claims.
First, if the rosy economic projections that are used to forecast high returns in private accounts are true, than the current system will also receive enough revenue to remain solvent through the next 75 years. If the dire economic projections that are used to forecast that the current system will go broke come true, than private accounts will perform badly as well.
Secondly, the social security program does not represent our nations most urgent fiscal crisis. the program will remain totally solvent until 2043 and after that will still be able to meet 75% of it’s obligations. By contrast the current deficit in the federal budget will produce a $2.6 trillion deficit in the 10 years begining in 2001, compared to a $3.6 trillion deficit in the social security program over the next 75 years. The Medicare program also faces a more alarming surplus than the social security program, thanks in part to President Bush’s fiscally irresponsible Medicare Drug benefit.
The $3.6 trillion deficit in the social security program over the next 75 years is less than half the $11.1 trillion revenue shortfall over the same period that will be created by making the 2001 and 2003 tax cuts permanant.
Can anyone tell me wehy we have a greater obligation as Christian to protect paris Hilton’s trust funds from the inheritance tax than we do to protect millions of elderly Americans from destitution and misery?
My conservative friends failed to respond to the substantive argumets I made but rather attacked me with labels like “socialist”. Perhaps this signifies that you reaaly lack the logic and facts with which to respond. Nonetheless if you are going to support a risky scheme that could hurt people you should provide the facts to support your arguments, rather than with just labels.
Note 10: Missourian, those of us who invest in 401Ks, real estate, etc, know that there is still an element of risk involved. Many people, despite doing the “right thing” (i.e., investing), lost hundreds of thousands of dollars several years ago after the .com slowdown. Those who were lucky enough to not be in the process of retiring may have gained some back. Others may not have. Housing values, while hot right now, may drop dramatically in some areas of the country.
In light of this, I’m not sure what you mean by “accepting the consequences of their actions.” What is the suggested solution if one falls into the above categories? Hitting up relatives (who are hopefully well-heeled) for cash? Putting a gun to one’s head? What, exactly?
Most of us do not believe that Social Security should be depended on as a primary means of income or to keep people in Gucci sportswear. However, I’m not sure how a modest safety net for the most basic of human needs is equated with socialism. This need not be an all or nothing issue.
Note 10: Missourian, those of us who invest in 401Ks, real estate, etc, know that there is still an element of risk involved. Many people, despite doing the “right thing” (i.e., investing), lost hundreds of thousands of dollars several years ago after the .com slowdown. Those who were lucky enough to not be in the process of retiring may have gained some back. Others may not have. Housing values, while hot right now, may drop dramatically in some areas of the country.
In light of this, I’m not sure what you mean by “accepting the consequences of their actions.” What is the suggested solution if one falls into the above categories? Hitting up relatives (who are hopefully well-heeled) for cash? Putting a gun to one’s head? What, exactly?
Most of us do not believe that Social Security should be depended on as a primary means of income or to keep people in Gucci sportswear. However, I’m not sure how a modest safety net for the most basic of human needs is equated with socialism. This need not be an all or nothing issue.
Rejection of a bad “new” idea, in favor of a good “old” idea, does not signify a lack of ideas. Perhaps my conservative friends are motivated by a sincere belief that private accounts could actually help retirees. Unfortunately we have seen no credible proposal by President Bush or any Republican that would actually our seniors or the nation better off than they are under the present system.
I say that Republicans favor dismantling the system because every one of their proposals would weaken the finanacial solvency of the program, by more rapidly drawing down the social security surplus, while dramatically lowering payments, by reducing both the universe of beneficiaries and scope of benefits.
Republican claims that private accounts would produce more revenue for retirees than the present system is based on a number of frauduleny claims.
First, if the rosy economic projections that are used to forecast high returns in private accounts are true, than the current system will also receive enough revenue to remain solvent through the next 75 years. If the dire economic projections that are used to forecast that the current system will go broke come true, than private accounts will perform badly as well.
Secondly, the social security program does not represent our nations most urgent fiscal crisis. the program will remain totally solvent until 2043 and after that will still be able to meet 75% of it’s obligations. By contrast the current deficit in the federal budget will produce a $2.6 trillion deficit in the 10 years begining in 2001, compared to a $3.6 trillion deficit in the social security program over the next 75 years. The Medicare program also faces a more alarming surplus than the social security program, thanks in part to President Bush’s fiscally irresponsible Medicare Drug benefit.
The $3.6 trillion deficit in the social security program over the next 75 years is less than half the $11.1 trillion revenue shortfall over the same period that will be created by making the 2001 and 2003 tax cuts permanant.
Can anyone tell me wehy we have a greater obligation as Christian to protect paris Hilton’s trust funds from the inheritance tax than we do to protect millions of elderly Americans from destitution and misery?
If you come out of your faith-based, ideology driven fantasy world, into the pragmatic, reality-based world the rest of america lives in you will see that none of the proposals to change social security stand scrutiny of can be demonstrated to make America’s seniors more economically secure or better-off. Therefore they should be rejected.
Dean writes: “Rejection of a bad ‘new’ idea, in favor of a good ‘old’ idea, does not signify a lack of ideas.”
Most of this new Republican stuff is completely driven by ideology and wishful thinking. Forty years ago this stuff was all on the margin or even considered extremist; it was rejected by mainstream Republicans. The only reason anyone pays any attention to it now is because of the propaganda empire largely funded by a few wealthy benefactors. With enough money even a bad idea can be made to sound plausible.
The situation in Iraq is a perfect example of the “new” thinking. A president who couldn’t be bothered to complete his domestic military service, assisted by his monumentally worthless and stupid chickenhawk advisors, gets us into a war based on false information, with no exit plan. Anyone in the administration who opposed this was either sidelined or gotten rid of. In this war the strategy is to use “underwhelming force.” So after the first two weeks of the war (after “mission accomplished”) we didn’t even have enough troops to secure all the identified munitions dumps. Now we can’t control the borders, and we can’t even control the six-mile road to the Baghdad airport. Two years after occupying the country we can’t even secure the Iraqi military and police recruiting stations; even though building the Iraqi security forces is supposed to be the key to our withdrawal every month recruits are blown up while waiting to sign up. “Bring it on,” he said, from the comfort of the White House, his own daughters safe and secure. Well, his wish was granted. The people who were responsible for getting us into this keep their jobs; some are even promoted. And their friends become wealthy.
So this is the crew that I’m supposed to trust to design a new retirement program? If I had a hot dog stand I wouldn’t hire these dolts to run it for me.
“The elevation of new over old is one of those beliefs that can only survive as a background assumption, without any critical scrutiny. Nobody tries to explain why new is inherently better, because the notion is obviously ridiculous. Take Social Security, for instance. Whatever you think of the general virtues of privatization, the program has actually grown more, not less, suited to the character of the U.S. economy over the last several decades. Social Security is designed to safeguard individuals from various risks. As the economy has grown significantly riskier, the need for a program that offers people a risk-free financial bedrock has grown stronger, and the case for subjecting the program itself to more market risk has grown more dubious.”
Jonathan Chait, The New Republic, http://delong.typepad.com/sdj/2005/07/the_battle_of_i.html
Dean and Jim,
I think you two are missing perhaps the absolute biggest point here. Jim mentioned United’s bankruptcy. The four United plans have been taken over by the Pension Benefit Guaranty Corporation. A ‘government’ corporation that insures pensions. The plans are underfunded by somewhere between 6.6 and 9 billion dollars. In exchange for taking on the plans, the PBGC got the following:
“Under the deal, the PBGC may recover additional money from United. As part of the agreement the agency will get $500 million in notes from United, another $500 million in notes convertible into United stock after the carrier emerges from bankruptcy, and $500 million payable if the company meets certain financial targets.”
PBGC is itself shakey, that is why the deal was done to make PBGC a shareholder of United, in the hopes that United will be able to partially repay the government.
The U.S. government is now fully invested in the future success of United.
Does anybody really, really think that the U.S. Federal Government will let United fail? How would you like to compete against a company which is partially owned by the U.S. government? If you rock them back on their heels, they will just cry for a bailout.
Now, the idea of ‘privatized’ Social Security accounts will take this model and expand it exponentially. In today’s market, being added to the S&P or the Dow is already a major coup, since index funds have to buy and sell based on the composition of an index. Getting added to the S&P means that a company’s treasury stock becomes more valuable. That currency can be used to acquire competitors or be issued for cash.
If the S&P 500 were the basis of Social Security investments, then this distortion would be even greater. Billions of dollars would flow in and out based on the composition of an arbitrary index. Would the Federal Government simply let this power go untapped? Or, would favored industries and companies find themselves represented in order to make big time politicians happy?
Would the Feds start requiring certain companies be excluded or included? Would the Feds allow a company comprising a large percentage of an index to get into financial distress – thereby harming the Social Security ‘investors?’ Or, would the governnment be quick with bailout money to protect the ‘system,’ thereby cancelling the judgments of the marketplace?
So much for capitalism.
Then there is the problem with social requirements. Even if the Feds left the Indexes alone, would the Feds refrain from targeting certain companies or industries for retribution? For example, suppose a Social Security fund had to buy the S&P 500. Well, that includes Phillip Morrison as well as companies that are ‘environmentally unfriendly’ such as Exxon. How much do you want to bet that new laws would require the fund to invest in the S&P 500, with the exception of the following companies: “Exxon, Phillip Morris, etc.” Before long, the acceptable investments will be considerably less than 500. Or, they could be more, since a law could say that the funds invest in the S&P 500, plus the following companies, “Lockheed Martin, Ratheon, etc.” If Congress can create tax loopholes specifically for certain companies and write those into the tax code – anyone care to bet that the government won’t target investment dollars to or from specific companies?
Does anyone really, really believe that the U.S. government isn’t going to abuse it’s new found authority under this plan?
This kind of public-private cartelism has a name – its called fascism. I don’t care much for the Social Security program as it is structured now. However, taking billions of dollars and ‘investing’ it under government control in the private sector isn’t going to increase freedom. Instead, it will open the door to even more control of the economy by the Federal Government. Last time I checked, ‘conservatives’ were supposed to be opposed to that.
On the other side of the coin, GM faces severe financial problems just to fund the pension and retiree health care plans it negotiated with it employees over the years. A couple of years ago, it had to float one of the largest corporate bond issues ever just to raise enough $$$ to keep the retiree health care plan going.
Fascism has always had a certain fascination in the American mind, possibly because it is a secular version of the theocracy that many of the 13 colonies had orginally. Which brings to mind my favorite Constitutional trivia. The establishment of religion clause was put in the Federal Constitution to prevent the dis-establishment of religion in many of the 13 original states. Many of the states had established religions and wanted to keep it that way. So much for a “wall of separation” between church and state. Now that’s federalism.
Private investment accounts as an “add-on” to, rather than a “carve-out” from the existing social security program would be both popular and beneficial. Any government sponsored investment initiative or program that helps increase the woefully low American savings rate can only help families and our economy. These accounts could be automatically funded from non-taxable paycheck contributions or out of tax refunds with a partial federal match. Social security withholding could be set up to automatically collect funds for private accounts unless the employee elects not to, under the assumption that it’s more difficult for the average worker to sign-up for a savings program than to opt-out. Americans could participate secure in the knowlege that thier core benefits will remain intact regardless of market fluctuations.
If the Republicans in Congress passed something like that, it would be a great and popular accomplishment that they could point to with pride before the next election. It’s a measure of the total domination of the Republican party by the ideological extremists that the GOP rejects a solution that is both politically feasible and economically attractive for another that is ideologically radical and unpopular.