Monday, March 07, 2005

If we are truly interested in preserving the social security system, then it should remain in its current form and appropriate adjustments should be made over time to ensure it continues to work. As it stands today Social Security will start dipping into its invested funds starting in 2019 or so to cover its outlays, which is exactly what it was supposed to do after the bipartisan restructuring done under Reagan. It will be running a maintainable debt from then on. Running a program on pre-assigned savings is not the same as being "bankrupt" to use the President's phrase. The U.S. runs a multi-trillion dollar debt, $1.6 trillion or so of which came from the social security program. If the rosy forecasts the Bush administration has laid out for the next few decades are accurate, a robust and growing GDP will provide enough income into the program to keep it solvent out past 80 years from now. Social Security will only be bankrupt when the Treasury Bonds it invested in are all cashed in. If there is enough income, they could be stretched out indefinitely.

Also, with all this talk of investing the social security funds, it should be pointed out that they are already currently invested, in Treasury Bonds in the bond market. Millions of people and dozens of countries invest in Treasury Bonds because they are better than gold; they are backed by the full faith and credit of the United States of America.

President Bush himself apparently has a significant chunk of his own personal wealth invested in bonds. If the President says he doesn't expect to have his bonds paid back when they mature, what should that signal to the bond market? When Bush implies that the money SS invested in bonds isn't there, he makes every single investment banker in the world wince. If we talk about our own investments in such a cavalier and inaccurate way, what should the rest of the world think? If we say that the money isn't really there, how can we convince Asia (which owns a major portion of our debt in the form of bonds) to purchase more bonds so the Bush administration can borrow the trillions it needs to keep its budget funded.

Josh Marshall explains his reasoning for maintaining the current system. I think he is correct and he gets right to the meat of the matter.:
"The other exchange came earlier in the roundtable when Klein let us know that he is still every bit a private accounts man. (One would imagine the only Woody Guthrie biographer to embrace such an unfortunate stance..) But I was struck by his rationale ...
Well, it's kind of amazing and somewhat amusing to see the Republicans so much on the defensive on this issue right now. It's an unusual circumstance. I agree with Paul in that private accounts have nothing to do with solvency and solvency is the issue. I disagree with Paul because I think private accounts a terrific policy and that in the information age, you're going to need different kinds of structures in the entitlement area than you had in the industrial age. But it is very hard to do that kind of change under these political circumstances where you have the parties at such loggerheads.

This has always struck me as the weakest of arguments for privatization and frankly it seems beneath someone like Klein.

I would like to ask Klein what it is exactly about Social Security that makes it appropriate to the industrial age but not the information age. If it is phased out in the next few years that would be one objective sign that it couldn't withstand the politics of this new economic era. But that would be a circular argument.

If anything I would think there's a much stronger argument that Social Security with its guaranteed benefits is more suited to this age than the last one, given how the increasingly transitory nature of work and the pressures of globalization are undermining the basis of defined benefit private sector pensions.

The real point, though, is that when you set aside all the practical matters of debt and transition costs, this is an ideological debate -- or to put it less antiseptically, a debate over different sets of values.

The idea behind private accounts is that people should rely on themselves alone and bear the consequences of their successes and their failures and random chance on their own shoulders. If things don't pan out for you in retirement, that's something to take up with your children.

The concept behind Social Security is fundamentally different. The first premise is that if you put in a lifetime's work there is simply a level of destitution below which society will not let you fall. Maybe you made so little during your working years that there wasn't enough to save. Or maybe you just didn't plan ahead well enough. Or maybe you suffered some misfortune. Whatever. If you worked you won't be destitute when you retire. People who made big bucks through their lives don't get a particularly good 'deal' from Social Security, if you insist on seeing it in investment terms. But that's a distorting prism, sort of like thinking you got a rotten deal on your medical insurance if you never have a catastrophic illness.

I like to think of this as the moral equality of work. In our society, we allow the market to assign all manner of different cash values to different sorts of work or even the same sorts of work under different circumstances. And by and large, within some very small limitations like the minimum wage or certain non-discrimination laws, most of us think this is how it should be. I certainly do. (In this sense, I think collective bargaining amounts to another competitive arrangement within a market economy -- though doctrinaire free market folks have always seen it in contrary terms.)

But the cash value of work isn't the same as its moral value. And if you look at the values imbedded in all those Social Security actuarial tables, you see this principle: whether you were a janitor or a fast-food worker or a doctor or a tycoon, if you worked during your working years you shouldn't be left destitute when your working years are over (retirement) or when, through no fault of your own, you can't work anymore (disability). No matter what. The common denominator is a life of work -- skilled or unskilled, impressive or unimpressive, remembered or forgotten. It doesn't matter.

In any case, that's only one way to look at it. More prosaically, you might just say that there are certain risks we choose to share across society. And this is one of them.

These are basic disagreements about how much we owe each other, how interconnected we are. And they're real disagreements with smart folks on either side. They existed in the 1930s; they exist today; and they'll exist in 2030s. The Internet and floating currencies and total quality management -- none of them settle the question. Klein should have the courage of his values and not pass this off on gizmos and gadgets.
-- Josh Marshall "

- Murphy

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