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January 22, 2008

Here's The Funny Part

Attaturk points to a commenter here, who quotes a letter yesterday in the Minneapolis-St. Paul Tribune:

We should be glad that our Social Security money wasn’t in the privatized hands of Citibank, Merrill Lynch and the other financial ‘wizards’ as President Bush had so strongly urged.

That's true as far as it goes. But in fact, the further the stock market drops, the less bad an idea privatizing Social Security becomes. (More precisely, the further the price/earnings ratio drops, the less bad it is.) That's because stocks have been comparatively expensive, historically speaking (as measured by the P/E ratio). That means privatization would have led to lots of people buying high and likely selling low. Privatizing Social Security would be a bad idea in almost all circumstances, but the least bad moment to enact it would be just after a stock market collapse.

That's the funny thing about privatization. It will be politically most popular during a stock market bubble, at the exact worst time to do it. And it will be politically impossible when it makes a little more sense. If there's a giant stock market crash this year, don't look for Bush to seize the opportunity to roll out his privatization plan again.

Granted, this isn't all THAT funny. But at a time when much of the world is about to get kicked in the nads even harder than usual, I'll take what I can get.

—Jonathan Schwarz

Posted at January 22, 2008 09:40 AM

"I'll take what I can get."
But, by gum and by golly, isn't that precisely "The American Way?" Whether the getting is by the accountant's pen or the thug's gun hardly matters.
We've never accepted a sense of community, except the phony blather about "remembering the neediest" once a year or the noblesse oblige gestures from the elites, ie, the rich.
All else is tossed into the garbagage can of ideology, extremism, socialism.
Socialism had a dream (rarely realized), Capitalism has a scheme. We live by it every day.

Posted by: donescobar at January 22, 2008 10:23 AM

Jonathan, you are incorrect when you say that "[p]rivatizing Social Security would be a bad idea in almost all circumstances."

Fortunately, achieving absolute accuracy in this particular circumstance is easy - just drop the "almost."

You, I, and everyone we know are all perfectly free to save for our retirement (if any) in any way we prefer. Social Security, on the other hand, is AND SHOULD BE a function of the government - archaically called, in the states I was born in and spent most time in as a child, the "Commonwealth." That word has an ideology attached.

By the way, Social Security also provides benefits for cripples, widows, and orphans - if you don't believe me you can look it up.

May the Creative Forces of the Universe stand beside us, and guide us, through the Night with the Light from Above (metaphorically speaking).

Posted by: mistah 'MICFiC' charley, ph.d. at January 22, 2008 10:46 AM

Jonathan, you are incorrect when you say that "[p]rivatizing Social Security would be a bad idea in almost all circumstances."

No, there actually are circumstances and ways in which it would make sense. However, it probably would have to be on another planet than this one, using another species than humans.

Posted by: Jonathan Schwarz at January 22, 2008 10:49 AM

Social Security IS A TAX(SS Act) and NOT an investment. Why not just TAX Wall Street and kick some of the revenue down to the SS Clientele?

Posted by: Mike Meyer at January 22, 2008 05:01 PM

When YOU listen to the term "Privatize Social Security" YOU are hearing the pratteling of a mindless con artist. If YOU want to invest, get a broker.

Posted by: Mike Meyer at January 22, 2008 05:07 PM

Ted - I recommend WHY WE FIGHT as a perfect follow up to THE CORPORATION.

Together, they cover pretty much why we are in the mess we are in - and the book THE SHOCK DOCRTINE shows how "they" implement those policies.

And, it becomes really clear that we had better get off this road we are on, or we will be destroyed.

Posted by: Susan - NC at January 23, 2008 03:30 AM

would like to add "Confessions of an Economic Hitman" to that list above.

Posted by: almostinfamous at January 23, 2008 11:18 AM