( - promoted by Laura Clawson)
When the market crashed last year, I thought that the resulting pain would be the final nail in the coffin for the champions of privatizing Social Security. Sadly, I was mistaken.
This past weekend, the ranking Republican on the U.S. House Budget Committee, Rep. Paul Ryan, same to New Hampshire to pitch his new privatization plan. Already, former congressman Charlie Bass is resurrecting his own call for privatization, just as he did when George W. Bush was trying to sell the idea to a skeptical country a few years ago.
Privatization was a bad idea then, and it is a worse idea now. Here is why:
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First, it is risky. That is not a slur - "risk" is inherent in private investing, and it is the counterpart to the potential "rewards" of investment. But Social Security is fundamentally different than private investment: it is a public safety net. Two thirds of American seniors count on Social Security benefit checks for more than half their income, and another severe market drop could leave them devastated. That scenario doesn't affect only those depending on the checks - it impacts all of us who would have to deal with the fallout. To make matters worse, the riskiness of privatization is compounded by the danger to seniors from scam artists, fraudulent fund managers, and the Bernie Madoffs of the world. Social Security is a contract between generations, and there is no room for private risk in that equation.
The second problem with privatization is that it is fiscally irresponsible. Transitioning to a system of private accounts leaves a significant fiscal gap, as today's payroll taxes would be invested in the market instead of paid to today's beneficiaries. The resulting hole is estimated at $2 trillion. For context, $2 trillion is twice the combined cost of the wars in Iraq and Afghanistan under George Bush. It is slightly larger than the massive tax cut President Bush passed in the early 2000's, much of which favored society's wealthiest at the expense of growing national deficits. And it is four times the cost of the flawed Medicare prescription drug benefit program. Not surprisingly, today's champions for Social Security privatization, like former Congressman Bass, voted for every one of those fiscal disasters.
Finally, last year's crash was a reminder that we need more safeguards on the market, not less. We've seen what happens when Wall Street runs unchecked: big banks put their very existence at risk for short-term gain, and traders buy and sell complicated derivatives that even they themselves don't understand. We need more reform to prevent the biggest and riskiest institutions from becoming the next Lehman Brothers, and we need to force Wall Street to pay back its taxpayer-funded bailout in full. That isn't about punishment - it is about restoring the investor confidence necessary for growth.
This debate, like many in Washington, is often over-simplified into a shouting match between those who hate the market and those who hate government. The truth is, each institution has an important role. As an attorney and public policy advocate for New Hampshire's colleges, I helped bring together lawmakers, educational institutions, nonprofits, and businesses in 1998 to create the "New Hampshire UNIQUE" college savings plan - one of the nation's first tax-advantaged college savings accounts. A decade later, tens of thousands of middle-class New Hampshire families have used private savings accounts to make college more affordable. The market can help families save for college and a more comfortable retirement. But we've also seen what happens when it fails. That is why we need government safeguards to prevent failure, and a Social Security safety net to protect our citizens.
Instead of trying to resurrect the failed theories of the past, it is time to move forward with a laser-like focus on helping create new jobs and spurring economic growth. We can do that with tax incentives for startups and small business expansion, with investment in clean energy technologies, universal broadband access and infrastructure improvements, and with some fiscal responsibility that was sorely lacking when Congressmen Bass and Ryan were in charge in Washington. But we can't do it by moving backwards.
This article was also printed in the Concord Monitor and the Keene Sentinel
A Concord attorney, Ann McLane Kuster is a Democrat running for Congress in New Hampshire's Second Congressional District (www.kusterforcongress.com).
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