Reich provides an example where he should know to be more honest

One of the big problems in current political debate is that of the intellectual integrity behind the arguments presented. The opposition to Social Security reform contrasts to the claims about “crisis” or “WMD” in a pattern that should make one wonder.

The reason that Reich’s article grates, is that as a former Secretary of Labor, Reich knows the history and economic forces which caused the Depression of the 1930s, and he knows full well, that those conditions have been addressed and the Federal oversight of stocks structured in such a way, that although a bear market or even a depression cannot be mathematically prevented, the example he cites has been reasonably excluded from possibility. For Reich to conjure up the 1929 Stock Market as a factor in the current Social Security debate, is about as rational as for the FAA to consider the Hindenburg Zeppelin disaster in a review of commercial airline safety. It’s simply dishonest from the start. [DJ Drummond. Left : Lies, Lunacy, & Liberal Loutness; Polipundit; 11mr05]

Detecting the problem means listening and learning

I launched into a particularly good rant/sermon from the pulpit of the Church of the Painful Truth earlier this week .. a sermon about the most dangerous epidemic sweeping this country, the epidemic of stupidity. Actually, it’s more of an epidemic of ignorance. Stupidity means you can’t learn. Ignorance means you haven’t.

Why can’t people see through the Democrats on this one? How in the world do you garner so much public support for the idea that in a free country it is better for you to turn over your hard-earned bucks to the government on a vague and breakable promise that some of that money will be returned to you at some time in the future .. as agreed to by politicians? How in the world can people accept this premise over the idea that your money should remain in an account owned and, to an extent, controlled by you where there is a guarantee that either you or your heirs will eventually get it all back .. with interest? Why can’t people see through this? Because they’re ignorant, that’s why. Economically brain-dead.
[Neil Boortz. Just what is the problem with private accounts? 11mr05]

The knee jerk opposition to personal accounts (which are an effort to transition pension ownership from the government to the individual) provides another case in point. The argument created to oppose these accounts is based on FUD mongering (spreading fear, uncertainty, and doubt) as Secretary Reich was doing. The real question is about where the money being removed from payrolls is currently being invested. Then a proper comparison can be made between options.

No responsible person advocates stuffing money for savings in a mattress. Since the 1929 brouhaha, FDIC has provided insurance to provide security of deposits against bank collapse. Money can also be lent to the government in terms of bonds and these are backed by the solvency of that government. Money can also be invested in partial ownership of private companies in the form of stocks and will have a value based on the success of those companies.

Another place money can be stashed is in a legislative promise of Congress. This is only secure insofar as Congress decides it is. And this is where current social security taxes are being placed.

Banks are a safe place to put your money nowadays but the yield is rather low. Government bonds are also very safe and also provide low yields. Stocks are a bit more risky and have historically provided long term good yield. With stocks, there is enough flexibility to estimate a risk and yield balance that best serves various investment goals.

Legislative promises do not have the history of reliability that banks, bonds, or stocks have been shown to have. For instance, social security benefits have already been subject to trimming by legislative action. There is every reason to believe that even more trimming will occur as the population demographics and other factors stress the legislative promise. And this is the reason why Social Security has a long history of being the ‘third rail of politics’ that responsible politicians try to put on the table for discussion.

When it comes to money woes, a good general guideline is that putting off the inevitable only makes the outcome worse. It is better to bite the bullet early. This is what is being advocated for Social Security. What can we do now to reduce the legislative promise before the legislature has to break that promise (again)? The President has said he is open to any and all serious suggestions. The Democrats have demanded that shifting ownership to the individual be removed from consideration.

The public has to determine whether limiting options, especially with the kind of rationale Reich is using, is a road to follow.

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