It's 2004 all over again. This little gem of a clip features Glenn Beck, Cato Institute's mouthpiece Chris Edwards and Freakonomics author Steven Dubner gnawing on how Social Security "must be privatized." For the children, of course.
Ordinarily I'm not a big fan of taking what Glenn Beck says and deconstructing it, simply because I believe what Glenn Beck says is utterly irrelevant and without enough merit to give it any attention. But this clip grabbed me because all three of these yahoos spoke as if they were granted authority from on high with regard to the future of people's pensions. Not only were they completely mistaken, they turned their arguments against health care reform into arguments FOR privatizing Social Security, serving them up with a large dollop of unwarranted certitude.
Donning my spit-proof suit to debunk some of the obvious nonsense they spewed into the airwaves...
1. Wall Street is more trustworthy than the US Government
Yes, Chris Edwards really said that. Actually, what he said is this:
"I think there's a lot less market risk than there is government risk."
He said it like everyone knows it's true, except there's not one iota of truth to it. We live in a country with an established federal government that has been in existence for about 235 years now. Since 1942, citizens eligible for Social Security have received monthly payments right on time (even by direct deposit if they want!), with small increases for cost of living adjustments. For anyone receiving Social Security, there's no doubt in their mind about when they'll receive their next check, how much it will be, and whether the check is good.
On the other hand, Edwards and Dubner say, "Hey! The stock market is above 11,000, so you people who lost your shirts in the last Wall Street raid? C'mon in, place your full confidence in the young turks of the stock market for your retirement security!!"
Of course, Edwards speaks with the authority of one who would love to take an axe to every social safety net this nation has in the name of conservative, small government values. If he states with authority that the markets are less risky than the government, he does so from his fantasy rather than looking at the government we have right now.
2. We're investing in a world market that will, over time, grow
This, from the xenophobic crowd on Beck? Really? Oh, but then Edwards says this:
"And the return, again, in Chile and Argentina is very high."
I suppose that's true, but not because Chile and Argentina have strong markets with tons of growth potential. A quick glance at the current exchange rates tell the story. Invest a dollar in Chile and Argentina, expect 2-3 times the buying power there because their currency is so weak against the dollar. The reason their currency is weak? A shaky global economy, their need to get their own debt under control, and political instability (at least in the case of Argentina). Edwards sees a business opportunity in the misfortune of others. Why am I not surprised?
3. The myth of privatized pension success in "2 dozen countries"
It's interesting to me that Edwards pointed at Chile and Argentina as examples of investment opportunities. After all, Enron had deep business interests in Argentina, and look how that turned out for everyone. Exxon-Mobil and the American Petroleum Institute are big benefactors of Cato, along with the erstwhile Koch boys. A simple Google search shows Cato working long hours alongside their friends in these countries to privatize pensions.
Unfortunately, it's not working all that well. Jane Bussey is a Miami Herald staff writer who reports extensively on Latin America's economic status and has an excellent working knowledge of how privatization of those pensions has hurt the economy. In one article entitled "Argentina's version of Enron", she does a terrific job of laying out the problems with the Cato approach to retirement security.
Far from turning Argentines into believers in capitalism, some elderly have become disciples of anti-free-market ideas, marching, manning picket lines and waving banners in protests in Buenos Aires. Retirees who have seen their private pension funds melt in the economic collapse have joined those from the old Social Security system whose benefits have been sharply reduced by the bankrupt government.
Cato's response to the criticism?
Researchers at the Cato Institute insist that Argentina's failure is not a sign that privatizing Social Security is a mistake.
"I don't think you can blame the pension funds for not succeeding in the terrible environment the government created," said Ian Vasquez, director of the Project on Global Economic Liberty at the Cato Institute.
"We have always said the reforms are a step forward," Vasquez said. "Everyone in Argentina has suffered whether they stayed in the old system or not, and that is because the government has so mismanaged the economy."
Cato's premise assumes no governmental or political risk to a private system of pension investment. In other words, there must be less government risk than market risk in order for a privatized system to succeed. In countries like Argentina, that is clearly not the case, as Cato now understands, given the government's decision to seize private pensions and re-institute the public pension system in order to remain solvent and viable in a global marketplace.
Argentina proves Edwards' lie about risk. In the United States, market risk far exceeds political or government risk. Without government risk, there is no argument to privatize the Social Security system, which is why it's so necessary that he state with unequivocal certainty the lie of markets bearing less risk than the United States government.
Really, the truth is far more stark: Cato serves its masters well. Its masters have a long history of interest in Latin American countries. The oil, cheap labor, corrupt government and convenient ways to wash money have been attractive to Cato's keepers for a very long time.
Beck and his cronies couldn't care less about young people. Just as in 2004, this new push to privatize Social Security is nothing more than a cynical money grab and gratuitous smackdown of a system that is in need of tweaking, but is far more secure than any market-based investment, particularly in the world of global markets with more than a small measure of political risk.
It comes down to this: Do you trust a government by, for, and of the people with an established track record of meeting its obligations? Or do you trust a global profit-driven market system loaded with potential for con artists, Ponzi schemers and South American politicos with their hands in the pocket of American industry?
Don't cry for me, Argentina. I'll stick with the USA on this one.
Update: In fairness to the Republicans, Beck and Cato, I'll also note that Blanche Lincoln also supported privatizing Social Security. Way to go, Blanche. I think I'll give another donation to Bill Halter!)