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The Bush Administration How the Word "Insurance" Got Lost From Social Security Insurance by Mitchell McCann In the Media now, and every where I look, are Right-wing pollsters touting that "Social Security be Privatized". But what on earth does this mean? What for instance, is Social Security? How many Americans know the answer to that one? And when did the word, Insurance, get conveniently dropped from the term? Good For Individual but not for Society? Today, Right-wingers in Congress and the White House are clamoring for giving individuals the right to invest what is their social security insurance. But, Mr. Richard Wirthlin, Ronald Reagan’s pollster, taught straight away the fallacy of composition, exactly the logic coming out of the mouths of today’s Right-wing. This principle holds that: what is true for the individual is not necessarily true for the group. An example: If an individual family starts saving instead of spending, that family will probably get ahead. But if the group of all, (or even most,) families start saving instead of spending, the economy might slip into depression as workers are laid off for lack of demand. The Source of the Idea As we begin the 21st Century with all indicators rising, a serious downturn seems a very unlikely worry. But a study of economic history shows that there was a boom mentality in the early part of the 20th century. Let us hope that the American Economy is healthy and wise, benefiting from the lessons of the past. In the year 2032 we need to be in very good economic shape. Saving, not spending was an urgent necessity for most American families in 1932, the pits of the Great Depression, the depression that spawned programs like Social Security. A gradual and prudent change from the deficit spending of today toward a strong pay-as-you-go and borrow only-as-a-last-resort (when the returns are certain to be there,) American economy will provide for all, workers and retirees alike. One of the motivations for instituting Social Security Insurance, with its retirement income program, was to fight seniority. Many of the workers that still had jobs in the depression were the older, more senior workers. Economic planners thought that freeing up jobs for younger workers would invigorate the economy. President Bush always states that workers from about 55 and older have nothing to worry about. The changes won’t affect them. There are from time to time some sages who suggest raising the retirement age. The proponents of privatization of Social Security Insurance suggest that this will never happen. But it has happened. When workers born in the late 1930’s and 1940’s began working and paying into the fund, they were set to retire at age 65. This has been changed upward. And it could happen again if Congress and the population decide to change the law. There are many older Americans who voted for President Bush in 2004 and felt betrayed when on the morning after the vote, he said that he was going to change the Social Security Insurance system. Some fundamentalist senior Republicans keep a can, of albeit premium, dog food in the cupboard. Some even eat it once a year, or when there is a disaster abroad. Keeps them humble and adds a certain nervous edginess to life. Some think that it cuts several strokes off their golf scores. Insurance Works, Stock Market Not Always So now we are back to the Social Security system "crisis." We are told that there is a funding problem looming, and this from many sources. The solution, which is painted only in broad strokes, is privatization. None of the analysts who have better access to the partial privatization plan, say that it has any effect on the problem of insolvency at some future time. Perhaps the problems are related. If Social Security Insurance had more "horsepower," the retirees would be better off and the shortfall would disappear in the smoke of tires burning. But perhaps not, if the shortfall was solved, or perhaps just brought into perspective, the privatization solution would get a problem. Many would have liked to have had the 401k type programs available from the start of their working careers. This may be what the proponents of privatization are counting on. 401k was a very popular program when the economy was booming. It was not so popular with companies, whose accounting was a house of cards, falling flat at the first careful audit. When workers were forced to take their employer’s contribution in company stock, and found that they could not trade that stock on for a long period of time, the program became less popular. But all in all, the American’s feel very good about 401k and the new program, though different, will try to collect a pass in Congress on as a 401k look-a-like. Now we are told that in the new program future retirees will tap the benefits of the growth industries, and outperform the stodgy traditional Social Security Insurance. This will be assured because there will be some kind of protection. Where is the freedom in that plan? Market analysts, with the exception of one, Marty Zwieg, have been very inaccurate in calling downturns. I have heard it said that some respected market analyst had "called nine of the last two recessions." Economics is a frustrating study. But there are some persistent themes. The short-term and the long-term are often at odds. "The prospects are bright, if we can make it to the payroll on Friday." Is there an analysis of an alternative future wherein American’s start doing right? Not fudging the figures to make them look good anymore. And how about restoring the word Insurance into Social Security, before we forget what it’s meant to do anyway? About the Author(s): Mitchell McMann is new contributor at Juryfury.com. He lives in Flagstaff, AZ and has a bachelors degree in Economics. See under Our Contributors to find out about the Author(s) of this article. |
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