Sunday, February 17, 2008

Social Security vs. Individual Security

[This post is a re-run from three years ago (March 7, 2005). At that time the president and his Republican supporters were trying to advance the nutty idea of "privatizing" Social Security, leading to what looks to me like Individual, not "social" Security. With the presidential race now underway, it's time to revisit some of the old struggles to remind people how different the two parties stand in this debate.]
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Josh Marshall was listening to Meet the Press yesterday.
[I heard the same program on my car radio, but didn't pay much attention because like so many of the pundit shows it struck me as a babbling contest of soundbites as this or that clever turn of a phrase tried to out-spin another one. Words and phrases like predicate something or other... suffering from... waning of... yadda yadda (suffering? Gimme a break) -- phrases like that turn me off, especially when content is about an inch deep, without the benefit of being a mile wide.]

He zeroes in on a central point about Social Security:

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.

Here, in easy to understand language, is the difference between what we have and what is being proposed by that wonderfully appealing idea of "private" (Damn! That's great! I get to own it myself myself!) "accounts" (Gee! Just like the bank! My own piece of the rock that nobody can take away! Wow!). Well what we have already has accounts. And the accounts are better than private. They are collective, like insurance. Have you looked at your Social Security statement lately? It's humbling to see. There is a record of your earnings going all the way back to those scrimp and scrape days before you earned enough to piss away on a date to the movie.

I would like for someone to grab a random bunch of statements, representing a balance cross-section of American wage earners, do a bit of arithmetic backwards, and figure out exactly what they would have been "contributing" (I still hate that word. It's income tax with no deductions.) to a pretend "private account."
Next, with a bit of analytical projecting, take each one and figure out what it would be worth today had those little bits been collecting in some kind of investment. Remember, now, the investment cannot be in real estate, privately owned business, or other hard assets...just paper. Not just any paper, but the "safest" (read low-risk, another word for low interest rate) places. We need to discover how well a very conservative person would do over a lifetime of work if those moneys had been placed in a private account rather than being used for Social Security (and oh, by the way, to also feed the kitty of the general fund, leading to what we now call the so-called "trust fund" that many argue is worthless). My guess is that most people would not have anything like enough to maintain them when they were no longer able to work due to age or health. It is certain that those we now refer to as the working poor would be SOL.

Josh Marshall's insurance analogy apt for Social Security. If you never have a catastrophic illness you might think your insurance premiums are a ripoff. Same is true for Social Security. Young people like to see themselves as comfortable and well-cared for in their retirement years, because that is how young people tend to think. At least that is how young people think around those who sit around the movers and shakers who make policy.

Very few policy makers actually get out into the population they presume to represent and pay attention to the large numbers of people who make up the economy. Like the Kennedy clan trekking up the hollows of West Virginia, genuinely shocked and saddened by what they found, very few of our politicians take the trouble to venture into places where the underground economy operates, with drug money, bartered child care, and I-1099's that never get filed by "sub-contractors" who are really casual laborers, often illegal.

This appeals to me:

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 embedded 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.

Yesterday I heard another report of someone living the fulfillment of the American Dream. A young woman where I work tells of her family's journey. Her parents came from a poor Caribbean country where they simply worked hard at anything they could do. With no special training, and with ambition that only comes from having no other choice, they migrated to America where they were able to rear a family, save enough to buy some real estate and now live in retirement, a retirement which came to them, incidentally, before they were sixty.

I made my heart glad to hear this story. It reminded me of one of my all-time favorites, a man from Cambodia who started years ago as a dishwasher in the cafeteria and has become one of the most sought-after sushi chefs in the Southeast, with a beautiful wife and three incredible kids, living in suburbia.

But these stories are few and far between. Most of the stories I know about are filled with children growing up with only one parent or being reared by another relative because one of both parents cannot do the job for one reason or another. Substance abuse, unresolved medical problems and corrosive social habits seem to be the norm for many people.

But even with all the problems I have witnessed, I am still observing a group of people at work, earning whatever they can at very low wages to make ends meet. Some have more than one job. I cannot imagine what it must be like not to be able to work at even the lowest rungs of the economic ladder, but I do know that the numbers of job applications far outnumbers the number of available jobs, even at the lower edge of the economy. With thirty-five years in the food business, I can speak with some authority about conditions at the lower edge of our so-called "service economy." (When I hear pundits talk about "moving us from the industrial age to the information age" it makes me roll my eyes. The vast numbers of people at work in America have no idea about "ages" and "eras" and "trends." They are simply trying to make a living the best way they can, with whatever resources they can manage. )

Anyone who thinks that replacing Social Security with some kind of Individual Security is a good idea is not living in the real world. Life in the real world is for many - in the words of Thomas Hobbs - "nasty, brutish and short." Sure, we now have flush toilets and cell phones, but these and other benefits of modern society are no reason to pull the economic rug from under people who have participated as best they knew how in the society until they could no longer do so.

Earlier this morning I came across the list of Slate 60, listing the sixty most generous philanthropic donors for 2004. As I perused the list I couldn't help thinking how far removed from where I live these people live and move.

In this, the ninth annual compendium of the country's 60 biggest givers, let us take stock of the State of the Turner Sweepstakes. Back in 1996, when CNN founder Ted Turner, provided the inspiration for Slate's list of top givers, he expressed the hope that the competitive juices that have nourished America's great fortunes might spill over more generously into the cup of human kindness....Overall, the Slate 60 pledged, paid, and bequeathed a heart-warming $10.1 billion in 2004, up from $5.9 billion in 2003.

Ten billion dollars.
Ten. Billion. Dollars.
That's a bunch of change, you know. Between that end of the economy and the other end, there is a range of wealth. We are not, thank God, either rich or poor with not much in between. In America the economic plane is less steep, the top and bottom less extreme.
Somewhere up the ladder, somebody is making a bit more than ninety thousand bucks a years. Whoever they are, and going on up to about one hundred fifty grand, I don't think it is unreasonable to ask them to start chipping in a bit more for Social Security.

Raising the cap for "contributions" ( I still can't keep from putting that word into quotes) seems to me the most realistic and reasonable remedy for whatever ails Social Security.

1 comment:

Deborah said...

In researching for a recent article on Greenspan, I read up on Ayn Rand philosophy. Bush's fiscal philosophy is pure atheist Randian. Practically straight out of her books.

Reward the "successful." Nothing is owed to the less successful and nothing should be "given" to them. They are leeches hindering the wealthy successful. And government should exist only to provide armies and judiciary to protect the wealth of the successful.

She was a devout atheist who detested the teachings of Jesus Christ, and who famously said that "Selfishness, not charity, is a virtue."

Greenspan was a close associate and devotee of Ayn Rand for 20 years. He even wrote a chapter none of her books.