No, I didn't write castrating. Get your mind out of the gutter. This is a reprint of a response to what I read over at Time Magazine's Swampland blog, originally posted there. Former Congressman Dick Armey (R-Cato Institute) is guest posting there, thankfully only for one more day...Guess what? Even though the push to privatize Social Security was shot down in flames in 2005, Armey decides to have another go at it.
From his (nice title) comment, Why Do Liberals So Stridently Oppose Choice and Ownership?:
Armey: "Supporters make it sound like it is a guarantee."*
And unless Social Security is changed by an act of Congress, it pretty much is. I'm suprised that, as a former member of Congress, Mr. Armey forgets that Congress has never cut benefits for retirees; Congress would sooner cut its own throat. I'm also suprised that Mr. Armey is unfamiliar with the concept of an implied contract.
Armey: "Let’s go back and look at the Chilean retirement security system."
Yes, let's take a look at the Chilean system, one which President Bush has called "a great example" for other countries, along with stating that the United States could "take some lessons from Chile, particularly when it comes to how to run our pension plans."
I'm assuming that Mr. Armey agrees with these statements. If so, would he be so kind to explain these outcomes of the privatized Chilean retirement system:
"More than 17 percent of Chileans 65 and older keep working because their pensions are inadequate, according to a government-commissioned study," - Poor Chileans labor past retirement, Boston Globe, Feb 28, 2005.
"..a recent World Bank study calculated that a quarter to a third of all contributions paid by a person retiring in 2000 would have gone to pay (pension fund commission) charges."- Chile's Retirees Find Shortfall in Private Plan, New York Times, Jan.27, 2005
"For those remaining in the (Chilean) government's original pay-as-you-go system, the maximum retirement benefit is now about $1,250 a month. The National Center for Alternative Development Studies, a research institute here, calculates that to get that same amount from a private pension fund, workers would have to contribute more than $250,000 over their careers, a target that has been reached by fewer than 500 of the private system's 7 million past and present contributors." - Chile's Retirees Find Shortfall in Private Plan, New York Times, Jan.27, 2005
"Nearly half of Chilean workers, for example, are employed off the books in the so-called informal sector, while many others are hired as independent contractors, who are not required to contribute to a pension account and do not do so regularly because they cannot afford it." - Chile's Retirees Find Shortfall in Private Plan, New York Times, Jan.27, 2005
"The annual cost to the (Chilean) government, still the guarantor of last resort, has remained steady at 5 to 6 percent of the nation's economic output." - Chile's Retirees Find Shortfall in Private Plan, New York Times, Jan.27, 2005
Armey:
"..if you simply gave younger workers and Swampland readers the option of choosing either a Chilean-style personal account or staying in the current Social Security system, I think we'd know which system they'd choose, even if they say something else in public..."From Chile's Retirees Find Shortfall in Private Plan, New York Times, Jan.27, 2005:
"Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in
benefits as they would have received if they had stayed in the old system."
"Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month."
"'Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me,' he said, 'are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981.'"
No, Mr Armey...Privatization of Chile's retirement system was good for a high return on investments, due to all the money being dumped into the bond and stock markets. Has it been shown to be good for the average citizen of Chile? Not really...People are having to work past the age where they
should be retiring and the Chilean government is still having to act as a safety net for those who bought into the private system.
Perhaps Mr Armey needs to spend more time outside the conservative think tank he chairs. He'll probably run into terms such as "investment risk" and maybe he'll stop insulting our intelligence with his re-heated Cato Institute rhetoric.
*Side note: Armey cites the 1960 Flemming V. Nestor decision in an attempt to back up his point. Armey doesn't. Nestor wasn't a US citizen. He was retired and drawing a pension when deported during McCarthy's witch hunts for being a Communist in the 1930's. Little suprise that Nestor's plea to receive his Social Security checks back in then-Communist Bulgaria fell on deaf ears in 1960.
There's more:
"Castigating Dick" >>
