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Title: Social Security: The Phony Crisis by Dean Baker, Mark Weisbrot, Dean Baker ISBN: 0-226-03544-1 Publisher: University of Chicago Press Pub. Date: November, 1999 Format: Hardcover Volumes: 1 List Price(USD): $22.00 |
Average Customer Rating: 3.25 (8 reviews)
Rating: 5
Summary: Don't FIX what ain't BROKE!
Comment: Social Security PRIVATEERS tell us that in 2029.or 2032...now 2050 (notice that the date has to be constantly readjusted BACK every year) it is "calculated" by a Government advisory commission that Social Security won't have enough income to cover more than 75 percent of the benefits it must pay to aging baby boomers.
But the authors point out, the specificity is illusory, all lever-pulling and smoke-blowing from the Wizard of Oz. The projections aren't economic but actuarial extrapolations based on assumptions that the all the actuaries know are fictitious at best. Tweak them ever so slightly--lift real wages by a quarter- or half-percent per annum, or immigration by a little--and the so-called "crisis" disappears entirely. But according to the apparat-niks at the CATO Institute and the attack dogs at the OUT-Fox-ed Network--you might think the numbers have come down from Moses. They haven't. Social Security isn't in trouble and the criticisms of it are not logical as the authors of "The Phony Crisis" point out.
First of all, Social Security is an INSURANCE System, not an "investment". When you factor in the cost of buying disability and survivor insurance and "invest the difference"...the performance "advantage" of equity markets gets razor-thin at best. It turns out that Social Security yields the same as nice safe government bonds, which any intelligent investor knows should form the basis of an investment portfolio.
Secondly, the so-called performance advantage of the markets has a whole lot of IFs that the PRIVATEERS conveniently fail to mention.
Forget hyper-collapse 1929-style for the moment. Since the Crash of October 1987, U.S. markets have been on a nonstop charge; but if you'd gone into the same markets in 1970, you were worse off by 1980--not to mention where you'd be today if you'd bet on Japan in the mid-eighties or Southeast Asia's "sure thing" markets a couple of years ago. Will you do all right in the long term, as brokers and economists insist? Well, probably yes--but then as Keynes observed..."in the long run, we're all dead."
Here's where the income and wealth distribution effects of privatization turn very ugly. For millions of Americans--who bet on Kaypro instead of Microsoft (oops), Pan Am instead of American (sorry) or cattle futures without the skill and connections of Hillary Clinton (smile, please)--life at 75 could mean not "golden years" but working for the folks at the golden arches, or even being out on the street. A FACT of life that the young people who invested in the dotcom bubble are learning the hard way.
How many of us realistically will beat the averages? If 120 million workers are turned loose to bet the markets---40 million of whom are marginally literate or numerate--as the privateers recommend---it turns out that most will lose. The mutual fund industry's dirty little secret is that three-fourths of funds under-perform market indexes. Yet such funds have millions of na�ve investors in them; in one recent survey, a majority of mutual fund investors couldn't even distinguish between a "load" and a "no-load" fund.
There is another issue, so far undiscussed in the debate. For the first time in nearly thirty years, the federal budget's in balance. But it's in balance because each year the Treasury borrows $80 billion from the Social Security Trust Fund surplus, and "covers" the deficit in the rest of the federal budget. If a big piece of Social Security contributions go into private accounts, the trust fund surplus will disappear and the federal budget will plunge back into deficit. Which federal programs are we supposed to cut to make up for it?
If you count the cost of the so-called "free market reforms" over the past twenty years--to a once-viable savings-and-loan system, to Mexican workers and peasants (who've paid for bailouts not once but twice), to the world's poor as they've worked off the global debt crisis. Think about the lives of Indonesian peasants, or Korean and Thai workers today--all set to pay for the "can't miss" marketization of Southeast Asia, just as Americans have so wonderfully benefited from downsizing, capital-gains reduction and globalization.
The folks that brought you ALL these disasters are the ones telling us that now it's Social Security's turn to face the "free market reform" just because it doesn't meet the ideological test of a handful of right-wing zealots.
Social Security is not a disaster. Benefits are moderately progressive, meaning that the bottom 60 percent of retirees get more back than they paid in. More than 90 percent of us pay into it during our working lives and more than 90 percent of us can count on its benefits when we retire. The minor adjustments that are outlined by the authors are all that is necessary to save Social Security.
Rating: 1
Summary: Illogical
Comment: The authors claim that just because average real return (after inflation) on the stock market has averaged 7% this does not mean you can count on this in the future. Let's take the most pessimistic scenario of long term economic downturn leading to the next few decades of extremely poor return on stocks - though again this is without precedent in our history let's assume the possibility all the same.
Public companies are nothing more than productive assets - investments in people and equipment - that help create a valuable product (good or service) for cash. The value of a company is determined by its ability to produce cash flows from now out into the future. From these cash flows companies reinvest and grow making stock price appreciate, paying dividends, paying bondholders and paying salaries. Social Security taxes come from these salaries. If there is a long-term economic decline - stagnant or decreasing cash flows - then salaries and accompanying tax revenue will also fall. So if the economy takes a long-term slide downward where will the government get the tax revenues to pay for Social Security?
Rating: 1
Summary: Social Security is broken for those under 40
Comment: The authors fail to show how the current social security system will pay out less than 20% of what young participants (those under 40) contribute over their working careers. And this ridiculously low return on contributions (adjusted for inflation) does not even allow those participants to get any "real" return on their investment. Putting money into a passbook savings account will at least return close to the rate of inflation so that over the long haul you'll get back something close to what you put in. The authors fail to show how badly shortchanged the young contributors are by the current system. For this reason I don't recommend anyone under 40 to bother reading this book if they want to get the truth on social security.
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Title: Social Security and Its Enemies: The Case for America's Most Efficient Insurance Program by Max J. Skidmore, Max Skidmore ISBN: 0813336635 Publisher: Westview Press Pub. Date: 01 August, 1999 List Price(USD): $20.00 |
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Title: The Real Deal: The History and Future of Social Security by Sylvester J. Schieber, John B. Shoven ISBN: 0300081499 Publisher: Yale Univ Pr Pub. Date: October, 1999 List Price(USD): $25.00 |
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Title: Saving Social Security: A Balanced Approach by Peter A. Diamond, Peter R. Orszag ISBN: 0815718381 Publisher: The Brookings Institution Pub. Date: February, 2004 List Price(USD): $32.95 |
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Title: The Great Unraveling: Losing Our Way in the New Century by Paul Krugman ISBN: 0393058506 Publisher: W.W. Norton & Company Pub. Date: September, 2003 List Price(USD): $25.95 |
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Title: In an Uncertain World: Tough Choices from Wall Street to Washington by Robert E. Rubin, Jacob Weisberg ISBN: 0375505857 Publisher: Random House Pub. Date: 18 November, 2003 List Price(USD): $35.00 |
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