David Brooks vs. the Truth:

In Saturday's Op-Ed by David Brooks, Real Reform for Social Security, we read:

... let's be clear about what this Social Security reform debate is really about. It's about the market. People who instinctively trust the markets support the Bush reform ideas, and people who are suspicious oppose them.

That is a lie. It's not distrust of markets that fuels the opposition to the "reforms". It's that the changes proposed will destroy the uniform guarantee of Social Security. Destroyed because individuals would be managing their own accounts. Some will do well, some will do okay, and some will do poorly. Those who do poorly will be shit out of luck, and not getting any Social Security Insurance - since the insurance component is gone.

Not only that, but the changes proposed will result in higher-than-needed administrative costs (brokerage fees, etc.). So further erosion will take place of the nest egg. No market distrust here, just an awareness of the realities of portfolio management.

Within the crowd that oppose Bush's plan, some want Social Security to be unchanged - to continue purchasing government bonds for greatest security. But others entertain the notion that some of the money could go into the stock market (and other investment vehicles) - but only collectively, by the Social Security administration - which can get the best prices for transactions and portfolio management. Not everybody who opposes Bush distrust markets. In fact, they think market participation, via 401K's, is fine as long as there is a rock-solid base of a poverty-preventing insurance program to start with.

MORE BROOKS BULLSHIT: Have you heard this one?

"When the Social Security program was created, there were 42 workers for each retiree. Now there are about three workers per retiree, and in 2030 there will be two."

There are so many things to be said about that. Improvements in worker productivity means smaller ratios can support retirees. Also, a surplus has been built up which means it's incorrect to simply cite the ratio. But most deceptive of all is the "42 workers for each retiree" canard.

Really. When the first check was cut to that woman with SSN 00001, there were millions of workers for each retiree. Millions. So when we went down to 5 or so in 1960, the system must have crashed. Right? (see our post on that statistic) And even Brooks manages to get the facts wrong here. In 1945, a decade after Social Security was implemented we had 40 workers for every retiree.

WHAT THE?     Brooks also writes:

The White House is heading toward a reform plan that would tie the benefit levels to prices rather than wages, which is a serious benefit cut. It would then use the power of the markets to compensate retirees for those cuts and to create a reserve fund to make the system solvent.

Let's get that straight. Current retirees and those about to, people with absolutely no market component of their S.S. account, may get a "serious benefit cut". But not to worry, Brooks says, because the power of the markets will compensate these retirees. Except they don't have anything in the market. Wow!     (Yes, we are aware that it's possible that there could be a COLA formula properly tailored for different age groups, but that sounds like a complicated affair. Can you imagine? A COLA formula based on which years and how much you diverted to a private account. And conservatives complain about the complexity of the tax code!)

EVEN MORE: Brooks helpfully tells us that there will be

"$11 trillion in liabilities that threaten to bring down the system"

But that figure is a projection of liabilities into the "infinite future" (until the end of time, conventionally reckoned as the 'heat death' of the universe in 500 billion years). If Brooks is a fan of projecting to infinity, we'd like to see him comment on the expected population of red states. $11 trillion is nothing compared to having every square inch of land occupied by a red-stater (and after a certain point, they'd have to be standing on each other's shoulders).

ALSO: Brooks writes:

"You already see some Democrats growing concerned over the perception that their party is trying to build a bridge to the 1930's.   ...   [Bush's proposal] is actually about building a bridge to the 22nd century."

No. Bush is building a bridge to the 19th century.

FINALLY: As to trusting the market. You can trust the market to do well over time but also to realize that it fluctuates and is therefore unsuitable for the reliability which an insurance program demands. Brooks is saying that people who don't trust the market to be a monotonic positive function also don't trust the markets in general.

That's a lie.

posted by Quiddity at 12/11/2004 02:06:00 AM