The Left Backs Private Social Security Accounts!!
For decades, the right has taken the initiative on this issue by supporting privatization plans that would allow people to invest their retirement funds in the stock market. These plans are so risky that they would inevitably leave an entire age cohort in the lurch some day, after the stock market suddenly droped. Even worse, they would distort our politics: anyone who has invested in the stock market knows that there is a real temptation to back political initiatives that raise the value of your stocks in the short to middle term, even if they are not best for the country in the long term.
The right has made some progress with these proposals, because the left has not advanced any proposals of its own. The left has just defended the existing Social Security System, a dinosaur left over from the 1930s, a time when people had faith in centralized government bureaucracies. Today, most people realize that our society is too dominated by centralized organizations, and they want something smaller scale. Until now, only the right has offered a plan to decentralize social security.
Now, Greider has called for compulsory retirement savings. People should be required to put some percent of their earnings in private retirement accounts, which would be based on the secure investments that pension funds usually make. This is a great improvement over conservative proposals: it keeps their idea of small scale, privately owner accounts, but it removes the risk of investing in the stock market.
I think we advance an even better proposal in the Preservation Institute Study “Social Security: A Liberal Approach to Privatization.” We say that social security taxes should be used to pay for a refundable tax credit that can be put in a retirement savings account, with the same credit for everyone who works.
Our proposal has two advantages over Greider’s. It uses a tax credit instead of compulsion, and it redistributes income: Greider has everyone save the same percent of their income, which leaves low income people with less to retire on, while our proposal gives everyone an equal tax credit to put in their retirement account.
Nevertheless, Greider’s article is an important step. The left has gone beyond just saying “no” to conservative proposals to reform social security. Instead, it has begun to formulate positive proposals of its own.
(William Greider, “Riding Into the Sunset,” The Nation, June 27, 2005, is available at http://www.thenation.com/doc.mhtml?i=20050627&s=greider).
("Social Security: A Liberal Approach to Privatization" is available at http://www.preservenet.com/studies/SocSecx.html.)