The price of privatization

Krugman, returning briefly from his self-imposed exile from the New York Times' op ed pages, serves up some of that old time religion we've been missing.

...[S]ince the politics of privatization depend on convincing the public that there is a Social Security crisis, the privatizers have done their best to invent one.

My favorite example of their three-card-monte logic goes like this: first, they insist that the Social Security system's current surplus and the trust fund it has been accumulating with that surplus are meaningless. Social Security, they say, isn't really an independent entity - it's just part of the federal government.

If the trust fund is meaningless, by the way, that Greenspan-sponsored tax increase in the 1980's was nothing but an exercise in class warfare: taxes on working-class Americans went up, taxes on the affluent went down, and the workers have nothing to show for their sacrifice.

But never mind: the same people who claim that Social Security isn't an independent entity when it runs surpluses also insist that late next decade, when the benefit payments start to exceed the payroll tax receipts, this will represent a crisis - you see, Social Security has its own dedicated financing, and therefore must stand on its own.

There's no honest way anyone can hold both these positions, but very little about the privatizers' position is honest. They come to bury Social Security, not to save it. They aren't sincerely concerned about the possibility that the system will someday fail; they're disturbed by the system's historic success.

For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make people's lives better and more secure. And that's why the right wants to destroy it.

It is astonishing to me that the Democrats appear poised to get rolled on this one. Social Security is a government program that nearly every one in America has had positive contact with, whether they've benefited from it personally or it was Aunt Millie who did.

It is one of the New Deal reforms that helped make the Democratic party the dominant party for fifty years. And yet I have not heard one Democratic politician since Al Gore make a passionate plea for shoring up Social Security rather than destroying it. This is one the Democrats can win, but they seem fearful of even entering the fray.

It is kind of interesting to look at this comparison of poll results about Social Security privatization. The results are significantly affected by how the questions are framed. When the poll was taken makes a difference as well. When you put it as a question of choice ("do you favor giving people the choice to invest some of their social security taxes in the market"), most favor (though generally by a small margin. When you frame it as a question of risk*, the results are far different.

* "A proposal has been made that would allow people to put a portion of their Social Security payroll taxes into personal retirement accounts that would be invested in stocks and bonds. Some people think that individuals would have more money for retirement if they were allowed to invest and manage some of their Social Security payroll taxes themselves. Others think that it is too risky and could leave some people without adequate money for retirement if the stock market were to decline in value significantly. Do you favor or oppose this proposal?"

Respondents opposed that proposal, by a margin of 60/40. A recent report in the Wall Street Journal showed that many people have trouble managing their 401k plan. I know of many people who haven't even looked at their quarterly statement since the market crash in 2001. Democrats need to learn to frame this issue better than Republicans.