McSame on Social Security
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Joe Conason
The most puzzling aspect of John McCain’s political persona is his habitual attraction to George W. Bush’s bad ideas. Their shared enthusiasm for invading Iraq and then escalating the war is why “McSame” will soon become the new shorthand for the Arizona Republican, replacing “maverick”—but that isn’t the only reason. He doesn’t just endorse the disastrous foreign policy initiatives; he loves the failed domestic policy schemes, too.
Specifically Mr. McCain is a longtime supporter of President Bush’s Social Security privatization initiative, last seen descending into oblivion only months after its introduction in 2005. He played a cameo role in the promotion of that notion (which never became an actual plan or bill in Congress) when the White House trotted him for one of the President’s staged public “conversations” on the subject. Back then, his pleas for everyone to sit down and negotiate the surrender of Social Security to Wall Street were universally ignored, yet that scarcely seems to have discouraged him.
Actually, Mr. McCain supported Social Security privatization before it was uncool, when he first ran for president eight years ago. The Wall Street Journal reported recently that a proposal to divert a portion of payroll taxes to finance private accounts, like the Bush scheme, was “a centerpiece of a McCain presidential bid in 2000.” Both he and Mr. Bush have wanted to dismantle Social Security for many years, in fact, and he has indicated that will be an important goal for a McCain presidency.
Sensibly enough, however, his advisers are trying to mute such themes in his campaign, knowing that privatization is extremely unpopular. They may have noticed that $50 million worth of advertising and promotion didn’t work three years ago. They may also have noticed that their candidate is poorly equipped to discuss the issue. As he once confessed, “the issue of economics is not something I’ve understood as well as I should.” So on the McCain campaign web site, the section concerning Social Security merely suggested that he would “supplement” the existing system with personal investment accounts – a suggestion that is entirely different from the more radical kind of privatization he has supported in the past.
But when the Wall Street Journal inquired about the discrepancy between his website and his previous statements, the candidate declared that his own position has never changed.
“I’m totally in favor of personal savings accounts,” he said. “As part of Social Security reform, I believe that private savings accounts are a part of it—along the lines that President Bush proposed.” (The other “parts” would include sharp benefit cuts, if the Senator’s past votes and statements provide any guide to future policy.) “I’ll correct any policy paper that I’ve put out that might intimate that personal savings accounts are not a very important factor,” he vowed.
Perhaps the old “straight talker” was simply saying what he thought would please powerful readers of the Journal, a newspaper whose editorial page avidly supports privatized accounts. Privatization is still not emphasized on the McCain web site, however, to say the least. He doesn’t utter a word about private accounts in a video on the site titled “Social Security.”
Instead, Mr. McCain pledges in that video to seek the same kind of solution achieved by President Ronald Reagan and the late House Speaker Tip O’Neill more than two decades ago. Following the advice of a commission headed by Alan Greenspan, who has since come and gone as Federal Reserve chairman, the President and the Democratic Congressional leadership agreed to bolster the system with new revenues and minor benefit changes. Although Reagan and Greenspan had long disparaged Social Security, they didn’t broach the topic of privatization.
Invoking the once-magical names of Reagan and Greenspan may work well on Youtube, particularly among the more gullible segments of the voting public. Between his remarks to the Journal and his video statement, it isn’t easy to determine whether he means to preserve, reform, or destroy Social Security, but the safest assumption is that he will pursue the same objectives that President Bush was forced to abandon.
As one of the wealthiest men in the Senate, thanks to the highly profitable liquor company bequeathed to him and his wife years ago, Mr. McCain faces no economic difficulty. He never has to worry about how he will afford retirement or the value of his assets, which is why risky schemes like privatization look so brilliant to him. But in the coming campaign, he may find that working families have no desire to turn Social Security over to the same companies now seeking bailouts from the federal government -- or to the politicians who would enact that bankers’ daydream.
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There is very little useful information / analysis about the current financial crisis. It is a serious problem that most media people don't understand finance or business and report accordingly.
A very simple step forward would be to insist that no pension funds are invested in hedge funds or private equity. A simple second step would be to give very good disclosure / information such that any 401K money that is invested in hedge funds or private equity is done so with the explicit, informed consent of the individual.
It is well-established that the best returns on investments over time come from equity funds that are indexed and -- for safety -- treasury bonds. Bigger returns are associated with bigger risks -- in the 90s it was tech stocks, in recent years pension & 401K money has been shifted to the "alternative investments" of hedge funds and private equity.
On one day last fall I was reading the Financial Times. On one page there was an Op-Ed speculating that fully half of hedge funds and private equity funds would be bankrupt / closed within the next few years. In the same edition, I read that pension funds were shifting "their assets" to the same investments to get "higher returns".
Steven Schwarzman sold the bulk of his stake last spring in Blackstone -- one of the biggest and most successful private equity firms that he co-founded. Does any rational person believe he did this because big riches were to be had to the buyers?
It seems somewhat obvious that the last people to enjoy the "higher returns" are the "stupid money" that is invested on behalf of the all of the working and middle class people saving up for retirement.
And these will be the people to lose when these "alternative vehicles" collapse.
It is very complex to deal with the current crisis -- the first pass should be the very simple step to get the average person's retirement out of these highly risky and unregulated investments.
Well what do you propose, Conason?? Private accounts are a good idea, most young people are support them. It's the god damn aarp crowd that doesn't want anything done with SS. Oh well, the funds will run out soon and they'll wish something was done during this time to fix it.
Hopefully it will run out when Conason and other baby boomers are coming on line.
There was nothing wrong with the orginial Social Security Trust and later on Medicare! Social Security was fine until the Congress was allowed to dip into it! The orginial Medicare plan was fine..doctors and hospitals were given tax brakes to participate...and patients had no balance to pay for medical expenses! (and thus no need for a Medicare supplement..and insurance companies were paid to process the Medicare claims..now they are selling supplements AND getting paid to process Medicare claims).
Both Social Security and Medicare worked evenly across the board for EVERYBODY no matter how rich or poor!
As to "private retirement accounts"..what happened to those ORGINAL IRA accounts that one could invest their own money in and have a substantial retirement?
Sorry, I just can see that the fact that I have gotten 40 years older since these ORGINAL programs have been changed..to put ME at a finanical disadvantage is ALL my fault!!!
It is unfortunate that private accounts in Social Security are unpopular as they would certainly provide me a significantly higher rate of return and retirement income. My current payments are projected to provide me with approximately a 2% annual rate of return over my life expectancy. A conservative bond fund has returned approximately 7% annually over the last 50 years. For the life of me I can not understand the opposition to this simple idea.
Any simple financial idea is most likely a risky venture. Anyone who thinks that SS is gaing only 2% per annum on investment over an expected retirement life is expecting to be dead very few years after retiring.
As my ex-cop friend reported, she got back her actual retirement investment in very short order. She expects to live another 20 or 30 years and is quite happy that she will get a constant flow of money for all that time. Had she invested in the market, she might have been close to broke by 2002.
If you feel the need to have a savings account, use an IRA. sock away as much as possible each year and between SS and the proceeeds of the IRA you will be happy. If you feel the need to spend every cent out of each paycheck, you are a lost cause you are so poor that it is a moot point about a savings account.
Remember to never trust a Republican about money. If they knew how to handle it would we be so heavily in debt now? GW Bush started with $5 trillion surplus facing him. He will end with a $9 trillion deficit. If that is fiscal responsibility I am Santa Clause and the Easter Bunny all in one. Bah Humbug.
Douglas..If the Social Security Trust had of been kept under "lock and key", Social Security would be in fine shape today..mainly due to the number of illegals paying in "illegally" that will never draw a dime out of it.
However, those in favor of doing away with Social Security and replacing it with (non) "Personal Retirement Accounts" are wanting to reserve the right to use YOUR money to benefit Wall Street first....and you if anything is left over after the whims of the investors that are going to "handle" your private investment!
If anyone wants a truly "private" account..go to the bank and put YOUR money in YOUR own name in a savings account...and only to the limit that such an account is insured for!!
McCain is on the wrong side of at least one other very important issue. Over the years, he has been a steadfast and outspoken opponent of Amtrak. In fact, he has publically advocated getting rid of Amtrak completely, even to the point of stating that position is "non-negotiable." It's hard to believe that McCain and the Bushies can't recognize what every other country in the world already knows and has put into practice: rail is the best way to move people quickly, comfortably and efficiently. Furthermore, it is the most fuel efficient and least polluting of all modes of transportation. One more reason, of many, why McCain just doesn't cut it.
I love how proponents of privatization forget three crucial items. First, the Wall Street managers of these accounts will want to take a cut via fees and whatnot, thus increasing the necessary return you MUST make in order just to MATCH SS.
Second, what if you're not as smart (or lucky) as you think you are and lose a chunk of your money? Guaranteed you will then "reconsider" and expect others to cover your retirement. Get enough people doing this, and what has REALLY happened? The Wall St. types make out like bandits and everyone's returns suffer.
Third, and most important. If you're not making a lot of money, you CAN'T put any aside for retirement. If you're in this bracket, it's also very likely you aren't familiar with high finance, so making personal choices isn't the best option for you. Even if you are very educated, you may still not be a very astute investor, thus requiring you to spend your time and talents trying to keep up, or paying more to finance types who may rip you off, defraud you, or charge you yet more fees!
The following is stated as fact:
"As one of the wealthiest men in the Senate, thanks to the highly profitable liquor company bequeathed to him and his wife years ago, Mr. McCain faces no economic difficulty. He never has to worry about how he will afford retirement or the value of his assets, which is why risky schemes like privatization look so brilliant to him."
All news accounts referring to the "liquor" inheritance have indicated that McCain's wife was the heiress (to a "beer" distributorship) -- it's her money.
In articles yesterday (4/5, as in this excerpt from the Boston Globe's website) this was more clearly stated:
Golden years for the Clintons Apr 5, 2008
His wife, Cindy, is an heiress to a beer distributorship, but the couple have a prenuptial agreement that has kept most of their assets in her name, the Associated Press reported. The Clintons' returns show that Bill Clinton collected at least $12. (Boston Globe)
Opinion is one thing -- fact is another.
Jim Loomis said: "It's hard to believe that McCain and the Bushies can't recognize what every other country in the world already knows and has put into practice: rail is the best way to move people quickly, comfortably and efficiently."
No. Actually the opposite has been true, especially in North America. Canada has very limited rail service outside of the Toronto-Montreal corridor. Mexico has all but abandoned intercity rail passenger service, with, AFAIK, no adverse impact on the overall passenger transport infrastructure. Rail passenger service is economical and practical only in small, densely populated countries such as those in Europe. Even there, however, its usefulness is overrated: despite the high cost of gasoline, the vast majority of intercity trips take place by car. Buses, planes and trains account for the rest.
Just as McCain is right on social security, he's right on Amtrak.
Mcflunk McCain for not having a mind of his own. Thats all we need is A Bush clone for our next President.
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