Letter written to Spinsanity on March 8, 2002

I see that you wrote on March 7, 2002:

McAuliffe ... launched a preemptive strike against plans to privatize Social Security:

The President wants to turn Social Security into Social Insecurity, by pursuing a privatization plan that would cut benefits and expose our retirement savings to the whims of a volatile stock market. Anyone who thinks private retirement accounts are a good idea should talk to Enron employees.

By re-framing privatization in terms of "Social Insecurity," McAuliffe attacks the plan with a silly catchphrase. Worse yet, McAuliffe tries to tie "private retirement accounts" to Enron, a popular political strategy in recent weeks. The 401 (k) plans held by Enron employees, however, differ substantially from most privatization plans, in part because Enron employees who lost the most were heavily invested in a single company's stock (Enron's) -- a practice which likely would not be allowed under a privatized Social Security system. Moreover, the crude phrasing of the attack appears to suggest that 401 (k) plans are not a "good idea" in general, even though they are a widely-used vehicle for retirement savings supported by both political parties.

Let's look at this closer.

Social Security is an insurance program that, up until now, has provided a guaranteed retirement income - an income that isn't based on the vagaries of the stock (or bond) market.

Changing Social Security away from an insurance model and towards an investment model, allows the "Security" part to be questioned. Using the term "Insecurity" doesn't seem that far-fetched.

But more importantly is the reference to Enron. You say that many Enron 401k plans differed from most privatization plans in it's stock-weighting. True. But on the other hand the plans were similar to privatization plans in that they are dependent on market trends. Thus, McAuliffe's reference is not out of line.

As to whether 401k plans are a "good idea", it depends on what the goal is. If 401k plans are viewed as supplemental to a basic, reliable, Social Security, then they are attractive. However, if private retirement accounts are going to be the only (or an overwhelmingly large) component of a retirement plan, they may not be such a good idea after all. It seems clear that McAuliffe was referring to the latter notion, because the subject of debate these recent weeks has not been "401k plans, good or bad?" but instead, "should we privatize Social Security?"

Regards,

There was no reply, nor was there any subsequent commentary at Spinsanity's website.

These guys haven't been giving proportional attention to the lies and spin out there. Somehow they think that they must devote 50% of their time to Democrats, which leads them nitpicking liberals, while letting tons and tons of distortions by Republicans be unchallenged.

posted by Quiddity at 8/17/2002 08:13:00 AM