KRUGMAN: No To Privatization- Social Security works very well. And we should build on that success.

[kpete]

Last edited Fri Apr 10, 2015, 10:56 AM - Edit history (1)

Where Government Excels
APRIL 10, 2015


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Maybe we wouldn’t need Social Security if ordinary people really were the perfectly rational, farsighted agents economists like to assume in their models (and right-wingers like to assume in their propaganda). In an idealized world, 25-year-old workers would base their decisions about how much to save on a realistic assessment of what they will need to live comfortably when they’re in their 70s. They’d also be smart and sophisticated in how they invested those savings, carefully seeking the best trade-offs between risk and return.

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And in the real world of retirement, Social Security is a shining example of a system that works. It’s simple and clean, with low operating costs and minimal bureaucracy. It provides older Americans who worked hard all their lives with a chance of living decently in retirement, without requiring that they show an inhuman ability to think decades ahead and be investment whizzes as well. The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?

Needless to say, suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists. As I wrote some years ago, calling for cuts to Social Security has long been seen inside the Beltway as a “badge of seriousness, a way of showing how statesmanlike and tough-minded you are.” And it’s only a decade since former President George W. Bush tried to privatize the program, with a lot of centrist support.

But true seriousness means looking at what works and what doesn’t. Privatized retirement schemes work very badly; Social Security works very well. And we should build on that success.

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[abelenkpe]

1. K&R

[daleanime]

2. K&R.....

[Dont call me Shirley]

3. Let's do this. Thank you Paul Krugman!

[1StrongBlackMan]

4. The only quibble I have with this piece is ...

And in the real world of retirement, Social Security is a shining example of a system that works. It’s simple and clean, with low operating costs and minimal bureaucracy. It provides older Americans who worked hard all their lives with a chance of living decently in retirement, without requiring that they show an inhuman ability to think decades ahead and be investment whizzes as well. The only problem is that the decline of private pensions, and their replacement with inadequate 401(k)-type plans, has left a gap that Social Security isn’t currently big enough to fill. So why not make it bigger?

Paul ... You are being too kind. The decline of private pensions was due largely to their being raided and most private pensions weren't replaced at all, let alone being placed with inadequate 401Ks ... they just took the money and bought another mansion or that 3rd boat.

[Dragonfli]

9. Good point, I would add to that - regarding decisions made by the young on investments

Or even older people making decisions as far as savings for retirement there is an element often overlooked by those that have money to invest (even the good guys that are trying to help) - a great many people are falling short on even meeting their monthly requirements regarding the basics, such as rent/mortgage food and utilities and are quite literally trying to survive running in the red.

This is true of a growing number of people, especially the young, so the assumption that all, or even a majority has the ability to save for retirement wisely or unwisely is not as reality based as most who weigh in on the subject may think.

We all know people (many of us would have to even include ourselves) that have to use whatever savings they have just to make it through one more month, or who have never even had an opportunity to earn enough to consider saving for any reason.

This reality is spreading alongside income inequality and the stagnation of workers pay. Individual savings for retirement is simply no longer a viable solution as a whole and will never become a solution unless a living wage becomes the norm.

Just one more thing to add to your excellent point about the lack of replacement of pensions.

[1StrongBlackMan]

15. LOL ...

Good point, I would add to that - regarding decisions made by the young on investments Or even older people making decisions as far as savings for retirement there is an element often overlooked by those that have money to invest (even the good guys that are trying to help) - a great many people are falling short on even meeting their monthly requirements regarding the basics, such as rent/mortgage food and utilities and are quite literally trying to survive running in the red.

You clearly haven't seen this Prudential commercial: http://www.ispot.tv/ad/7Cj6/prudential-the-prudential-dominoes-experiment

[Dragonfli]

17. Great! so that means since I am $50 short on rent this month, I can place -$15 into my negative cash

account and watch the dominoes increase in size as my debt accrues more debt! Salvation at last!

[1StrongBlackMan]

18. Funny ...

I was just talking to a tech-savvy friend about doing a "reverse-prudential" short video about how the Prudential thing works for poor people ...

"What do you have in your pocket, right now?"

"A notice that you are $50 short on your rent? Great, Let's see how it accumulates! ... That $50 turns into $75 at weeks end for none payment. But since you knew you were $50 short on the rent ... you paid half the electric bill; but even so, you still get to have it disconnected, with a $120 re-connect fee! But since it'll be off and you won't need heat until the late fall, you come out ahead using candles, and your only $145 in the red ... this week! ..."

[Dragonfli]

19. I hope you and your friend find a way to do that video

It would be educational to those that simply lack the life experience to realize how that reverse domino works. Educational for those that care anyway, those that don't care lack empathy and never will care no matter how much one tries to educate them.

[1StrongBlackMan]

22. True ...

I really want to do it because I have some (what I think are) really good ideas ... like having it in a split screen with one side being the "poor" side and the other side being the "not-poor" side. They both are $50 short; but, the avenues for dealing with the deficit are completely different.

I have enough ideas to make it a movie.

[dotymed]

13. Absolutely right 1 StrongBlackMan

I am disabled....leading to death... At the beginning of this year (after 8 years of a decent retirement from the Union (me), They (we?) hired a new benefits administrator corp.
Suddenly I am no longer retired and have had to hire a lawyer....$$.
SS drug out my disability determination out for many years. By the time it was approved, my benefits were almost halved.
I got a room mate and am barely getting by. Surviving, deciding which medications that I can afford, food, etc..
The medicare prescription coverage that i bought years ago (in case of just such a scenario) has unaffordable co-pays...$660 for one med that I used to take and pay $5.00 co-pay for and $173 monthly for another that I cannot survive without.
My retirement was about 1 1/2 times what I get from SS. I could live and afford surprises and medicine.
SS is way too inadequate to live on.
I was talking to my "roomie" and said that if our children had lived during our era and then suddenly thrust into our current
country, there would be daily riots. 99% of Americans have lost so many freedoms ( our children never experienced
those freedoms and don't miss what they never had. If the minimum wage had kept up with inflation and progressed with the same value over the last 40 years, it would be approximately $50.00 an hour. Our children never experienced living wages for the masses.
The wealth inequality, lack of freedoms and privacy (so much more in politics, etc..) would definitely cause massive unrest among the populace if they were a sudden phenomenon. I assume that was a major reason (besides the "dumbing down" of citizens) that our plight was slowly implemented.
Yes, definitely tax the wealthy. Increase pay and raise social security to the point where we should be if we had been allowed (pitiful) to progress at a continuous rate.
When politics are decided by money and 1% of the population has more wealth than the other 99% combined, Fascism,
corporatism, socialized capitalism for the wealthy (choose an "ism&quot has replaced Democracy in America and much of the world.
The slow implementation of this master plan has (so far) thwarted a major insurrection. I choose to believe that people are beginning to look around and call bullshit, lets revolt.
Since this major screwing has happened on our watch,we older folk need to fire back and truly educate this generation
about what we have witnessed (suffered) and show them that it is getting worse. Hopefully unite as one and force
justice into this greedy world.
We must stop this raping and idiocy. Really this is what we are sacrificing our progeny to spread across the world?
ELECT BERNIE SANDERS AS POTUS. That would be a huge step in the right direction

[bvar22]

14. Someone must be over 55...

... to remember what a real DEMOCRAT sounds like.
LBJ was the last.
As much as I hated him at the time for the War,
I never thought that he would be the last real Democrats for over 1/2 century.
Great Society, War on Poverty, Civil Rights...

LBJ moved the ball and scored several Liberal touchdowns.

[dotymed]

20. He did but

I prefer FDR...none of them were perfect.

[bvar22]

23. True. None of them were perfect,

...but LBJ took the New Deal and added to it in a number of ways that helped the Middle/Working Class & The Poor.

FDR is also my favorite, but I was looking for the last real Democratic President of the US.

Carter is a great man, and was a good president, but he started the deregulation of Big Business and has little to show for the Working Class and Poor.

[dotymed]

27. I agree bvar22. n/t

[rhett o rick]

5. k & r. Thanks for posting. nm

[Enthusiast]

6. If the Democratic Party doesn't embrace this as a 2016 campaign issue they are foolish.

It's time for the party to start protecting the interests of the people. It's time for the party to back away from their allegiance to Wall Street at our expense.

[liam_laddie]

7. Cowards, too!

[Hekate]

8. KnR Professor Krugman

[malthaussen]

10. If the question were one of competence, his point would have merit.

Since it is one of ideology, however, his point will be disregarded. There are perilously few occasions where privatization of anything has worked to the benefit of the general populace. Too bad the people who write the laws don't care about the benefit of the general populace.

-- Mal

[appalachiablue]

11. It's overdue for the Dem. Party to act on strengthening Social Security, not cutting it

through benefit reductions like the 'Chained CPI'. Otherwise I'll need to look seriously into the direction of the Party. The ill-advised, 2012 WH sponsored Simpson-Bowels 'Cat food Commission' speaking tour did real harm by confusing and convincing many regular Americans that SS was in trouble. Those two buy-partisan reps, Alan Simpson (R) and Erskine Bowels (D) received generous amounts of money for their tour efforts. This has to end. Same for the video of Pres. Clinton in the Halls of Congress telling Congressman Paul Ryan (R), GOP budget expert (?) that he would help with SS if needed c. 2012. We've been loyal democratic voters, donators and supporters for 5 generations, over a hundred years and want to maintain that tradition.

[bvar22]

16. When the Koch Bros/DLC bought the Democratic Party,

....one of their main goals was the "privatization" of Social Security.
That hasn't changed, and those people are still around in places of extreme power in our government.

Eternal Vigilance or massive reform will be the price for keeping our Social Security.

"suggestions along these lines are already provoking near-hysterical reactions, not just from the right, but from self-proclaimed centrists.

You will know them by their works.

[appalachiablue]

24. The Kochs, Pete Peterson and a bunch more including the buy-partisan centrists.

Some progressives hope the next inevitable economic crash will be the chance for change since 2008 was lost. Not sure about that, and the devastation will be immense. I read here that's what the trade union communists who Hitler hated thought when he was made chancellor in 1933. He'd be so bad the Germans would oust him and they'd seize the opportunity for power. But most of them were dead or imprisoned six months after that event as someone here wrote.

[WillyT]

12. HUGE K & R !!! - THANK YOU !!!

[JDPriestly]

21. .[u]Instead of reducing the bureaucracy in D.C., the privatization of Social Security

will necessitate the creation of an entirely new bureaucracy, that is, a bureau to investigate fraudulent "investment" schemes aimed to take advantage of the elderly.

My mother died in her late 90s. Until the very end, she was sharp as a tack .

But -- although she knew not just the full names but the birth dates and places of her many grandchildren as well as those of numerous ancestors and although she read avidly all of her life (including the New York Times and the Christian Science Monitor as well as, back when, the entire transcript of the hearings on Iran-Contra), in her final years, she panicked over balancing her checking account and keeping track of payments for her prescription drugs.

My mother managed her money (what little she had of it) extremely well all her life, taught school and loved her family. She helped her neighbors and was, all said, just a great person.

But I cannot imagine her managing an investment account once she passed, say, 70 or 75. (She mostly bought treasury bonds with her money. She was in the Depression and WWII generation.) That idea is just unrealistic. She would have been miserable, in a constant state of panic, worried and scared.

The idea of privatizing Social Security is just ridiculous. It's another one of the scams that the unscrupulous and cruel perpetrate on the elderly.

We are retired and if we did not bar calls from strangers, we would spend our days answering calls that are aimed to take advantage of the elderly -- repairs we don't need -- equipment we don't need. All kinds of things that we don't need, can't afford and that would only benefit the people selling them.

And that is what we will have if Social Security is privatized. A large sales force will be hired to scam the poor elderly and persuade them to purchase risky investments.

In the end, privatization of Social Security will require the government to pay even more to support people once they can no longer get jobs or no longer work and after the investment "advisers" who are really scammers finish with them.

I can't think of many ideas more ridiculous and pointless than privatizing Social Security.

I agree that the Social Security program should be enlarged and provide better benefits for the elderly. Privatization will not work. Those who suggest it should spend their time visiting the elderly in nursing homes instead.

[Yo_Mama_Been_Loggin]

25. Krugman hits another one out of the park

[DonCoquixote]

26. as someone who has voiced that he is not thrilled with Hillary

I can tell you one commitment she would make that, if she did it, and MEANT IT, would turn me from a skeptic to a rabid fan:

Sectretary of the Treasury-Paul Krugman.

with a side note that Larry Summers will not be let anywhere near his office, or Hillary's ear.