Social insecurity

The next big thing the liars in America will lie about is social security. A tremendous system, which Americans can be proud of, which ensures that the aged have at least something to live on when they retire, will be dismantled by an administration that is even now lying through its teeth about the state it's in.

We know they lie. They lie through their teeth. They lie blatantly, transparently, stupidly.

"Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction."

These are the words of a man who, if we choose not to believe he was lying through his teeth, we must believe is too stupid to be allowed out of his house, let alone anywhere near running a large country.

But this fucker and his crew, far from being physically restrained in the nuthouse, are going to be allowed to destroy one of the central planks of the New Deal. As the New York Times article shows, the problem in Social Security is mostly illusory and can be dealt with without running up a fresh, enormous deficit.

Why do the Bushistas want to privatise it? Surely they enjoy having a huge trust fund that is obliged to invest in the government? Don't they spend the money on tanks and guns?

Well yes, but there are three reasons it makes sense to rid the States of its pension provisions. In ascending order of importance they are: the ideological importance of lessening the government's influence on pensions. The Republicans, and particularly the neocons, profess to be the party of small government (a principle they are curiously slow to apply to the secret services and agricultural subsidies, for example). At the moment, the government must pay to administer pensions. Privatise it and lavish fees will be extracted from the workers' funds. (But, I hear a little voice say, surely they will legislate so that fees are capped etc. Yes, they will, and they'll quietly remove the protection somewhere down the track in the interests of "fairness" to business).

Second, it is nice to have a big pool of money to spend on missiles and the like, but the government will have to pay it back. That means you have to run a surplus. The more you borrow from pensions, the bigger the surpluses you must run. Republicans like deficits though. They like to spend money they don't have. They got the taste for it in Reagan's days and now they're addicted. Deficits mean that not only can they pilfer the wealth of today but they can line their pockets with the wealth of tomorrow. This makes Social Security a problem. The neocons have an ingenious solution. Borrow shitloads of money to pay off the money they already owe Social Security. By pretending there is a huge hole in the financing requirements of the pension fund, they can distract attention from the fact that that hole is actually filled with Treasury bonds -- government borrowing -- and will be more and more.

Third, having savers have individual funds means that the rich can get their fingers on the lovely pension loot without having to go through procurement processes, tenders and all that nonsense. Making workers invest in stocks and shares directly puts the money into the banks' pockets, erm, sorry, that should have read, the economy. But couldn't the pension fund just have done that anyway? Couldn't legislation have been written to loosen the restrictions on investment and allow Social Security funds, or a portion of them, to be invested in the stock market?

Well yes, but there are two problems. First, the pension funds can be expected to be reasonably conservative. Their investing will be constrained and it will be directed by men and women who one might assume will be looking to avoid risk. The individual workers cannot be expected to be experts and do not understand risk. They will be funnelled through advisers who will, in the usual way, tand to gain from suggesting one investment or another, and will bear no responsibility if it goes tits up. They will simply be sheep in need of fleecing to the financial business, and they will, some of them, be facing a cold future without the protection of a reasonable pension. Second, if the pension funds did not make enough money, the government must make up the shortfall. While an individual whose investments fail must just learn to love gruel, a pension fund must fulfil its obligations. So if the fund managers of Social Security were to make bad decisions and were caught by, say, a rapidly deteriorating bear market that they could not respond to quickly, they'd leave the government of the day facing unexpected payouts. This is the nightmare scenario that led the original framers of Social Security to insist that to keep the fund self-funding, it should only invest in Treasury bonds.

So why give a shit? I'm not an American, and most of them that I'm acquainted with are not going to be relying on a government pension (I suspect Hip Liz might face hardship if he bet his pension money on Enron but Peej probably owns GM with all the dosh she's pulled in from repackaging science and culture for minors). Neither do I live in a place that has the same provision for pensions or will do when I "retire"-- although the UK has SERPS, or did, I'm not sure which.

I care for two reasons. One, what they do there, they do here. Not so much in terms of what they do with pensions (I'm not sure how Australia works but I know that we pay a compulsory contribution from payroll into a managed fund -- I think matched by the government -- which is not too far from the American scheme: ours is a much more nannyish proposition than neocons would like to see and there isn't free rein with investment choices) but in terms of how far they are prepared to go in allowing private enterprise to thieve from workers, sorry, that should have read, do what a government should properly do for itself, erm, no, not that, erm, how far they are prepared to allow the "market", which has no sense of community and cannot consider the human dimensions of what it does, to deal with communal problems. Two, I feel that there is a huge difference between saying "individuals should be free to do as they wish" and "individuals must take responsibility for everything in their lives". The former is not on the whole objectionable to the liberal; but the latter certainly is. It simply ignores that it's not possible for the individual to take care of everything in their life. Libertarians have a philosophy that might work were we all hermits living on mountainsides, but certainly does not for citizens of modern societies. It ignores too the purposes we have for society. We can haggle over whose responsibility our old age is but what's next? Education? Let's say we agree that you should provide for your own education. This should sound fine to a libertarian. Why should the state have to educate us? Why should it be permitted to, even? Well, the state stands to benefit from our education and also has a stake in it. Because it benefits it should pay; because it has a stake in it, it should be permitted to take an interest. How about policing? Before London had a police force, every man had to go about armed. The streets were entirely unsafe. The liberty to be mugged and killed by a footpad is not one I'd go to the barricades for.

I know the counterarguments for government provision of pensions. We should just all save and leave the government out of it. To which I would say to our government, and that of the Americans, you first. You live within your means and put a bit aside and I'll copy you. As if. We are lectured about the need to provide for our futures by people who are happy to rob us of them.

posted by Dr Zen @ 1:09 pm