BF2S Forums "flapdoodle" about Social Security

Bush: "As a matter of fact, by the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you're 20 years old, in your mid-20s, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now."

Let's be plain about one thing: This campaign, cooked up mostly by Wall Street investment houses and conservative Republicans,was always about “fixing” Social Security the way one "fixes" a cat.

The perpetrators employed what might charitably be labeled flapdoodle to scare soft-headed politicians, inattentive journalists and innocent citizens into thinking there's something fiscally out of whack with Social Security.

They proposed that the program be "privatized" instead. Rather than pay payroll taxes into a government fund in return for an inflation-indexed monthly retirement stipend guaranteed to the end of your days, they said, you should hold on to your own money and put it in the stock market.

One would have expected the bear market of 2000-02, which shaved roughly 50% from the value of stock portfolios, to have buried the idea of replacing Social Security with personal retirement accounts forever.

Yet it rose to walk among us again, the way Rasputin clambered out of the frozen River Neva with a dozen bullet holes in his body. In 2005, President Bush tried to make it a centerpiece of White House policy.

With any luck, the 2008 stock market crash will permanently restore Social Security's luster. Indeed, the program looks so solid and reliable compared with every other source of retirement income -- your pension, your portfolio, your house -- that people ought to respond well to the idea of expanding it, in part by permitting them to put more money into their Social Security accounts to obtain better benefits.

Before we get to that, let's lay some of the slanders about Social Security to rest.

The privateers claimed that the program was doomed to bankruptcy. They talked about how its surplus, currently $2.4 trillion, is invested in nothing but U.S. government IOUs. They didn't mention that those IOUs are U.S. Treasury bonds, which are the safest securities in the world.

They said that the program was going to run out of money in or around 2042. They didn't say that they were relying on a single estimate (among many flawed and contradictory projections produced by the program's trustees) forecasting that the Social Security trust fund would be spent down to zero by that date, or that even according to that projection the program would still have plenty of funds to pay benefits thereafter.

Their point was that if we're going to "fix" Social Security, we need to start now, because we only have (at this writing) 33 years to get it right.

Of course that only exposes the folly of basing important decisions on long-term projections. If we were to project conditions today from the vantage point of 33 years ago -- 1976 -- we would be doing so in ignorance of personal computers, the Internet, cellphones, cholesterol drugs, the collapse of the Soviet Union, 9/11, the tech boom, the dot-com crash and the financial meltdown of 2008, all of which have had a profound effect on the U.S. economy.

You still want to tamper with a crucial program because of something you think might be true 33 years from now?

Social Security has never been touched by scandal. It pays benefits promptly and dependably. Its administrative costs are rock-bottom. When I move, the Social Security people always seem to learn my forwarding address without being told, sometimes before my mother does.

Contrast that with the history of personal retirement accounts. Traditional pension plans that make guaranteed monthly payments are going extinct in the private sector, supplanted almost everywhere by self-managed 401(k) accounts, which offer the opportunity to risk your retirement nest egg in the stock market.

Obama wrote:

worst financial crisis since the great depression.
the time to act swiftly is now, or else a national disaster will occur
only government can solve a problem of this magnitude

Last edited by ATG (2009-02-13 15:08:02)