Radley Balko responds to those who want to use the current financial meltdown as an argument against the privatization social security which constitutes a good portion of workers’ retirement accounts. For the unititiated, these “accounts” are now largely controlled and owned by the government under the fragile ponzi-scheme known as Social Security. Privatization, writes Balko, would allow millions of poor people “to accumulate inter-generational savings that could help their children or grandchildren escape the cycle of poverty.”
His opponents have argue that, had we private retirement accounts, they would’ve been decimated by the recent turmoil in financial markets, and that private investment is simply too risky. Mark Cuban is one such detractor.
I’ve found myself reading his weblog occasionally, he has some pretty smart things to say. Including, for instance, this gem (I get the feeling that Cuban didn’t know the half of what he was saying, more on this below) while blogging about last week’s orgy of Wall Street Bailouts:
And one last thing I have to mention. Does everyone realize how much bigger a disaster last week would have been had Social Security been privatized ? Please, let us all remember that when the topic comes up again in the future.
Lest anyone mistake my stance on “Social Security” privatization, let me put it front and center: Social Security is a fraud of the worst sorts and it should be abolished, forthwith. In this sense, I favor “privatization” of long-term care, a/k/a Social Security. How then, do I look favorably on Cuban’s position? And what was that bit about him not knowing the half of what he was saying?
Oh, I think he knew what he was saying, and I’m pretty sure he knew what he thought to mean. It’s quite likely that Cuban and I have vastly different assumptions about what is (or what ought to be) “private”, that is, were we to discuss the pros and cons of privatization, we’d be discussing two very different things. The hidden assumption in Cuban’s position is probably more-or-less: The market is free.
From which he concludes that privatizing Social Security would likely lead to more (and worse) of the same.
We can both look at the turmoil of the past week (or weeks, or months, or whatever) and agree that something is terribly wrong. But from those divergent premises, consensus is practically impossible.
This is because one unspoken assumption in my position is: the market is not free. This is evident by the fact that Government permits, encourages, and subsidizes businesses which are too big to fail.
If you go out of business, they take your fucking house. When they go out of business, you bail them out, prodded of course, by the cold steel barrel of a government gun. Am I the only one who sees something fantastically wrong with this arrangement?
To Cuban’s point, however, he is certainly correct on this: had all of our Social Security been tied up in Wall Street’s Toxic Assets we’d be up the proverbial creek, sans paddle. In a very, very bad way. If, and essentially only if, we had invested all of our money in financial companies in 1999, and were to retire tomorrow. This, of course, would not be the case for practically anyone. But I digress… Neither would I want the fund managers at Bear Stearns, or the financial gurus at Fannie Mae, managing my long-term security.
But I get the feeling that this is where our similarities end.
The whole mess is a product of a system in which profits are privatized (and how!) and losses are socialized, this was always implicitly the case. To be sure, AIG might not have known they’d be bailed out, Lehman might not have known they’d go bankrupt. But the industry as a whole could always be reasonably certain that Papa Government wouldn’t let them all be liquidated, couldn’t let go of the decades of accumulated power and paper wealth.
Balko’s clincher is matter-of-fact:
You think the stock market is risky? The federal government currently has obligations it will never be able to keep. And none of this accounts for trillion-dollar bank bailouts, inevitable wars or the new entitlements promised by the current candidates for present and future occupants of the White House.