Saturday, January 08, 2005


The Administration push for Social Security “privatization” is obviously a scam — since when is the Administration interested in something that will only be a problem long after Georgie is out of office? Global warming? Nope. Energy independence? Nope. Global competitiveness? Nope. Water shortages? Nope. Health care? Nope. Long- term structural deficits? Nope.

But what kind of a scam? Everybody who actually looks at the numbers seems to agree that it's a horrible idea; Brad DeLong (who has economic credentials out the wazoo) has been particularly energetic in tracking this piece of idiocy.

Well, the obvious answer is that they're paying off their Wall Street supporters and propping up the stock market. All those accounts will buy stocks and bonds, which will drive up stock and bond prices. They'll need to be managed, which means management fees. Big return on investment for Wall Street's campaign contributions. As with all “privatization” schemes, it “privatizes” only the profits for the Administration's friends, leaving the risks for the rest of us to deal with.

But there's another barb in this hook, and it also ties in with “personal medical accounts”, another little “privatization” oddity being pushed by the Bush administration.

One of the many potential train wrecks in our current economy is the consumer debt level. Far too many people are carrying far too much debt, especially unsecured credit card debt. American bankruptcy laws are by far the most liberal in the world, and the credit card companies are terrified of a wave of personal bankruptcies. They've been worried about this for a good number of years now.

Problem is, if a bank makes an unsecured loan (like on a credit card) and the person getting the loan goes bankrupt, the bank is simply out of luck. The creditors divvy up the assets as far as they will go, but they're not going to come anywhere near to covering the debts. Enough people declare bankruptcy and the banks are in Real Trouble. Doesn't seem to slow 'em down sending out “you have already been approved” credit card offers, though.

Now, there is a movement to tighten up bankruptcy laws. Personal bankruptcy is being portrayed as a way of simply writing off one's debt and starting over, with essentially no penalty. It ain't. It's a process that nobody in their right mind would go through voluntarily, but that's not the spin. I've even seen suggestions of bringing back debtors' prison. I dunno how serious they were; debtors' prison seems to be an ideal way of guaranteeing that you'll never get your money back.

Bush's “ownership society” generates a bunch of new “assets” that can be attached by creditors. Declare bankruptcy or lose a lawsuit, and not only are your savings gone, so are your future Social Security and medical benefits.

Now, Social Security is supposed to provide a minimum level of support. If somebody has their “assets” confiscated as the result of a bankruptcy or lawsuit, they no longer have that minimum level of support. So what are we going to do? Let them starve in the streets? (I get the impression from some of the more radical Neocons that that's exactly what they want to do.)

BushCo looks to be willing to spend a lot of political capital on this one. Best to pay off your credit cards now .... But that's good advice in general.

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