Tuesday, January 18, 2005

Been There, Done That

From the American Prospect:

A conservative government sweeps to power for a second term. It views its victory as a mandate to slash the role of the state. In its first term, this policy objective was met by cutting taxes for the wealthy. Its top priority for its second term is tackling what it views as an enduring vestige of socialism: its system of social insurance for the elderly. Declaring the current program unaffordable in 50 years’ time, the administration proposes the privatization of a portion of old-age benefits. In exchange for giving up some future benefits, workers would get a tax rebate to put into an investment account to save for their own retirement.

George W. Bush’s America in 2005? Think again. The year was 1984, the nation was Britain, the government was that of Margaret Thatcher — and the results have been a disaster that America is about to emulate.


Britain’s experiment with substituting private savings accounts for a portion of state benefits has been a failure. A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn. On average, fees and charges can reduce pension lump sums by up to 30 percent on retirement. The nation’s savings industry, which sells those private accounts, has already acknowledged this. Which brings us to irony No. 2: Just as the United States prepares to funnel untold billions to its private sector for the management of private accounts, back in 2002, many U.K. insurance companies, mindful of tough new rules against giving bad advice, began to write to their customers urging them to consider abandoning their private savings and returning to the state pension system — something hundreds of thousands of Britons have done already.

And this is the system that the United States is seeking to emulate?

Not only that, but has anyone considered the basic human instinct for making a buck that will kick in if privitization goes through? If you think you’re getting bombarded with spam and harebrained schemes (not to mention the outright fraud) that goes on with prescription medicine, wait until the Barnums and bunco artists get their claws into just a small portion of the Social Security windfall. The one advantage that Social Security has over anything else is that it is a monopoly. There may be private pensions, 401(k) plans, and all sorts of investments for people to sock away their money, but they are supplemental to Social Security; they don’t supplant it, and for all the talk about “limited government” from the Republicans, one of the basic duties of government is to provide a solid foundation for everyone. If we turn private enterprise loose on it, it will be a free-for-all of Ponzi schemes and shell games that would make a carnival midway look like a seminar at the Better Business Bureau.

The Republicans will never admit that there are just some things that are better left to being done by the government, and Social Security is one of them. Of course, I’ve never heard of a Republican who refused to accept a Social Security check, either…