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The naïve but still inexcusable Steven Baum, author of the hard-left Ethel the Blog, again tries to snow his reader by writing:
This 1997 quote wins for prescience. It's found on page 305 of Doug Henwood's Wall Street, in a section wherein he deconstructs the self-serving and wrong-headed arguments for privatizing Social Security. Now, anytime anyone uses the word "deconstruct" with a straight face, you know that the "argument" is 100% bullshit, since "deconstruct" is academic-fascist jargon for "lie about". Let us charitable, however, and suppose that both Baum and Henwood are merely hopelessly ignorant. Social Security, as we know, was instituted in 1935 as part of FDR's "New Deal", whereby he apparently hoped that emulating the social-fascism systems of Bismarck and Mussolini, he could prevent the U.S. from sliding whole-hog into a mode of dictatorship that the leading progressive lights of the day were already refusing to call "Stalinist". Social Security was conceived as part of a "safety net", that would supplement (but not replace) the deficient system of private savings and pensions (so deficient, indeed, that in many cases it simply did not exist). In order to avoid having Social Security stigmatized as (shudder!) welfare, it was disguised as a defined-benefit, unfunded pension plan supported by both employer and employee. In this enlightened age, to attempt to institute an unfunded (private) pension plan is less desirable than tattooing "FRAUD" on one's genitals; the tattooing will be less painful and be over quicker. Nonetheless, it wouldn't have been thought exceptional at the time. (An unfunded pension system is not inherently fraudulent. Let us suppose that we have a worker who we wish to eventually pension off at $10,000/year. There are two extremes to the way in which we plan for this. One is to have his pension completely unfunded; we set aside no money, instead anticipating that the cash flow of the business will allow us to pay him $10,000/year when he retires. The other is to have a completely funded pension; we consult acturial tables to determine how long he is likely to live on retirement, and make payments into a sinking fund that, at a specified and anticipated rate of return, will provide him with an annuity of $10,000/year. Between these two extremes, we can have an underfunded pension system, with some of the monies coming from a sinking fund and some from cash flow. We can even have an overfunded pension system, where we set aside more money than we think will be needed, hoping to reclaim the (presumably) tax-free capital from the fund upon the pensioner's death. (ERISA calls for exactly 100% funding of private pensions. Complete funding is a function of anticipated rates of return; employer accountants therefore tend to make assumptions that are not wholly realistic about this, in an attempt to avoid the Scylla of overfunding and the Charybdis of underfunding. As the provisions of ERISA calling for exact 100% funding are essentially attempts to penalize lack of clairvoyance, ROI projections that are not overtly fraudulent are generally overlooked. (An unfunded public pension has one great advantage over a similar private plan. The danger in an unfunded private plan is that, when it comes time for actually pay the pension, the company's cash flow will be insufficient for it to do so (at worse, it may entirely ceased to exist). Since the state can always send out armed agents to The problem here is not cash flow per se. Rather, it is the decades-old disguise of a social-welfare scheme as a pension plan. The original plan was that Social Security was to be funded actuarially by FICA (payroll) taxes. It is this which allows critics of the system to claim that payroll taxes are regressive; given that the benefits paid, as well as the taxes collected, are capped, this argument does not hold up in this respect (although, since excess payroll taxes are applied against the Federal deficit, the argument holds up in this respect). This is also why the AARP and its allies resist, against superficial expectations, the supplementing of Social Security revenues from the general fund; were this to be done, the last shreds of the already threadbare disguise would be stripped from it. Hard-leftists such as Baum do not, of course, have a conceptual problem with supporting Social Security from general revenues. Since this would be an impossible political sell, however, those who have already given up pretending to believe in the revolution, they try various other expedients, as long as they do not involve granting any actual power to those in whose name their expedients are nominally performed. And what has this to do with privatizing Social Security (you may well ask by this point)? Henwood is correct in stating "Over the long term, the stock market should grow roughly in line with the overall economy" (for pseudo-capitalist twentysomethings: "long term" means "over the next ten or twenty years", not "over the next ten or twenty months". The dotcom-and-telecom bubble of the 1990s in over; deal with it). Of course, real long-term growth in the economy has been over 3% since the end of World War II. The worker who retired yesterday, who presumably entered the work force as an 18-year-old in 1955, could have by putting into a GDP index fund a thousand (1996) dollars each year, amassed over $117,000 in current dollars -- hardly the wealth of Ind, but a sum that I suspect most of my readers would be more happy to have. Moreover, he would have done it without trusting to the vagaries of the political process in deciding which Peter will be robbed to pay which Paul (a process that Paul is happy to undergo, but one in which more and more late and post-Boomers are coming to realize that are playing the coveted role of Peter). Henwood's and Baum's unspoken (and utterly incorrect) assumption is that the long-term secular growth of the economy will be zero (something devoutly hoped for by all right-thinking academics and watermelons), that the American population will be discouraged by this bit of propaganda, and that, together with the additional propaganda that Social Security was, is, and will continue to be intended as the sole means of supporting retirees in dignity, will acquire in an increasing burdensome intergenerational transfer of wealth that will culminate the seizing of the entire economy in the name of a nominally-populist government by the nomenklatura of which they wish to be a part. John "Akatsukami" Braue Saturday, May 25, 2002 |
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