Anyone Want to Buy a Private Pension Plan? Going Once...

That
deafening silence you hear coming from the McCain campaign is straight-talkin'
John touting his plan for privatizing Social Security...not.

With
Wall Street banks falling like dominoes, a hundred billion dollars vanishing
overnight, and the Treasury Department scampering about with trying
to prop up failing enterprises from Bear Stearns to Fannie Mae, and
with domestic and global equity and bond markets swooning, Americans
are afraid to open those envelopes that come every quarter telling them
the value of their hard-earned 401(k) retirement plans.

That
deafening silence you hear coming from the McCain campaign is straight-talkin'
John touting his plan for privatizing Social Security...not.

With
Wall Street banks falling like dominoes, a hundred billion dollars vanishing
overnight, and the Treasury Department scampering about with trying
to prop up failing enterprises from Bear Stearns to Fannie Mae, and
with domestic and global equity and bond markets swooning, Americans
are afraid to open those envelopes that come every quarter telling them
the value of their hard-earned 401(k) retirement plans.

No
wonder John McCain isn't touting privatizaton these days.

It's
not just that many of those private 401(k) plans McCain and his ilk
so love for the working stiff were invested in the very financial
institutions that have seen their share values drop to zero, or in other
financial institutions that were themselves heavily invested in the
stocks or debt instruments of the growing list of failed institutions.
It's that the tottering US financial edifice is shaking the broader
markets, making stocks, bonds, and even giant insurance companies like
AIG look like houses of cards, and a poor bet for funding one's dotage.

Paul
Krugman, in today's New York Times, says that the Federal Reserve
Bank and the US Treasury Department, in letting Lehman Bros, the nation's
fourth largest investment bank, go bankrupt, instead of doing yet another
government bailout, was a kind of financial Russian roulette.
Could Lehman's collapse lead to a wholesale collapse of Wall Street
and the US banking system, ala 1929-31? Krugman says, incredibly,
that nobody really knows, including Fed Chairman Ben Bernacke and Treasury
Secretary Henry Paulson.

That's
not the kind of thing you want to hear when you've managed, over the
course of a working life, to save maybe a few hundred grand in a tax-deferred
retirement plan that is all invested in stocks and bonds. Nor is it
very comforting, if you are one of the millions of Americans who put
your money into some kind of insurance annuity, expecting to get a guaranteed
stream of income for life, to hear that AIG, the largest insurance
company and one of the biggest issuers of such "private pension"
programs, is struggling to come up with $40 billion in cash to avoid
going belly up itself.

Now
fortunately, for nearly all American workers, there is a backstop: Social
Security, which is not invested in any financial instruments, and which
pays out monthly benefits to retired and disabled workers and their
dependents based not upon the whims of the markets but on the lifetime
earnings of the worker in question. Unlike a 401(k) investment, which
is dependent for its size and reliability on the performance of the
financial markets in which its assets are invested, or an annuity, which
is dependent upon the financial survival and viability of the insurance
company which issued it, Social Security is a program in which the payments
of benefits are an obligation of the federal government, and are paid
from a fund of money that has been paid into by the retiree and her
employer in earlier years, by current workers and their employers who
pay a tax on current earnings, and, if necessary, by supplemental funds
allocated by the Congress. Social Security benefits are adjusted each
year for inflation (though since President Bill Clinton, those
adjustments have been reduced because of a sleight of hand that makes
inflation appear to be less than it really is).

McCain,
and Republicans in general, have been pressing for years to have Social
Security privatized, or partially privatized, with at least some of
the money taken from employees and employers for Social Security invested
in financial instruments such as stocks or bonds. They've tried to
sell this snake oil to young workers by pointing to the rising stock
market, and claiming ominously that some day, with so many current workers
approaching retirement, Social Security will go "bankrupt." Last
year, the Bush Administration, which has filled the Social Security
Administration with GOP hacks, actually had notices sent out to every
American worker warning that "unless something is done," Social
Security might not be there for younger workers when it's their turn
to retire.

This
kind of cynical scare tactic is beneath contempt, and is designed to
weaken support for one of the most significant progressive legacies
of the New Deal. The reality is that as the Baby Boom generation
reaches retirement, starting with the first Boomers who will hit 65
in 2011, the elderly lobby, already enormously powerful, will swell
to become perhaps the most powerful "special interest" voting bloc
this nation has ever seen. Retired Americans will have the electoral
clout in another 10 years to make Social Security whatever they want
it to be.

They
(we really, since at 59 I am part of that generation) will insure that
the government pays us and our fellow retirees a decent retirement stipend,
and we will also insist that reforms be undertaken to insure that our
kids also get secure retirements.

We
will do this not by undermining the program, as McCain and other Republicans
have called for, by privatizing all or part Social Security, but by
making sure that every dollar earned by even the richest of people is
taxed, instead of having the social security tax limited to the first
roughly $100,000 of earnings. We will demand that if more taxes are
needed, they be paid by employers, not workers. Currently employers
and employees each pay about 7.5% of wages as a payroll tax into the
Social Security Trust Fund. There is no reason why that split should
be 50/50, though. Employers could pay a bigger share. (Right wing economists
try to argue that any tax paid by an employer ultimately comes out of
the employees' wages, but this ignores the law of supply and demand:
workers don't negotiate wages, or accept a job at a certain pay level,
based upon the gross wage being paid, but on what they will be taking
home each payday. Extra taxes paid by an employer could not be automatically
taken out of employee pay. They would have to come out of corporate
profits.)

The
timing of the current spreading financial crisis has exposed McCain's
call for privatization of Social Security as a bad idea masquerading
as reform. Since McCain can be expected to pursue the idea if elected,
it's just one more reason for American voters to reject his candidacy.

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