I had a horrible realization in the shower this morning. No, I didn't do anything crazy last night - just Bar Review and the Chicagoist happy hour - my realization was of a larger magnitude than the result of any trouble I could whip up on any given night:
When I graduate from law school, two and a half long years from now, Bush will still be President.
In parliamentary systems, we'd have had a vote of no confidence a while ago, but things work differently here. A 34% approval rating may make life hard now, but no administration completely stalls out for three full years. This means that, as much as we'd like to forget about it, Social Security privatization will come back.
The Economist reminds us what happens in the long run when leaders with delusions that the rules don't apply to them partially privatize pensions:
CHILE'S private pensions system, created by Augusto Pinochet's dictatorship almost 25 years ago, has been a model for pensions reform in many other countries. While academics have long noted various flaws—not least the high profits raked off by the six pension-fund administrators (AFPs)—it nevertheless came as a shock when a recent study suggested that over half of the Chileans affiliated to the system might not get a decent retirement income.
New York Times useful idiot John Tierney is a big fan of the Pinochet pensions system and he dedicated some column space earlier this year to flogging it, using the traditional Rovian PR tactics of carefully chosen unrepresentative examples and misrepresentations:
Tierney, June 14, 2005:
[Chile's] pension system has a stronger safety net for the older poor than America's (relative to each country's wages) and more incentives for people to work, because Chileans' contributions go directly into their own private accounts instead of a common pool like Social Security.
Tierney, April 26, 2005:
After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I'd put my money into [Tierney friend and Chilean economics professor] Pablo's mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security's, would be indexed to compensate for inflation:
This is a common error, which isn't a mistake at all, but usually a willful misrepresentation. If one of the problems with Social Security is that current workers pay for current retirees, there cannot be growth compared to investments like mutual funds. You don't get a low interest rate on your Social Security contributions, since you don't have an account that accumulates interest rates. If there were accounts of the type that Tierney has to invent in order to calculate interest, of course they'd be earning more money, even in the safest of securities. America has made a policy choice that we would guarantee pensions that don't run out if you live too long. Chile has a sustenance-level backstop pension closer to our Social Security system.
This makes the difference between the Chilean system and the American system clear: Both Americans and Chileans can get a basic defined benefit contribution pension. Americans and Chileans can have investment-based pensions, but Chileans have a system where government endorsement and regulations mean that certain companies get to take inflated fees in exchange for a chunk of the pension business formerly done by the government.
It's fairly clear why establishment Republicans are so gung-ho about this while the public is wary: it's an opportunity for rent-seeking, which means fundraising, which means more tools with which to maintain their grip on power.
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