Social InSecurity. The New York Post published today a shameless pack of lies by one of Reagan’s “trickle-down” hacks advocating the destruction of Social Security as we know it by replacing a single government trust fund with millions of personally managed stock portfolios. The author actually had the nerve to claim that even in the worst of times, “the average rate of return on diversified stock portfolios [which, of course, is not defined] for any 35-year period was 6.4 percent and never below 2.7 percent” whereas “most young people entering the labor market can expect Social Security to deliver a rate of return below 2 percent.” Astonishing.
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Let’s examine these purportedly meaningful ‘statistics’. First, we are given an undefined term, “diversified stock portfolio” and are to accept on faith the claim that some, undefined level of diversification is a guarantor of long-term profit. How “diversified” a portfolio must a private investor have to sustain the ups and downs of various segments of the stock market? He doesn’t say. Can a modest investor get that kind of diversification, or is that the kind of thing only the rich, with professional investment advisors managing their money, have access to? What if a person, given the right to invest any way he chooses, decides NOT to diversify but puts all his eggs in the wrong basket? Well, then, if his life savings are destroyed, that’s his own fault, and society has no obligation to save people from their own stupidity, right? Wrong. He wouldn’t have been put in that position if we had just left Social Security alone!
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Even if a small investor were able to diversify adequately, will he ALWAYS do better with private investments than with Social Security managing the money for him or her?
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Well, let’s look at the period covered: 35 years! That 35 years has to include both the time the investment is put in and the period over which the proceeds are taken out.
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How many investors have LOST THEIR SHIRTS in the stock market in the past decade? A young person might be able to survive the loss of thousands or tens of thousands of dollars from a severe market drop, because s/he’s still working and still bringing in income. But how on EARTH is a retiree, old and feeble and in poor health, unable to work, going to survive the loss of thousands or tens of thousands of dollars from bad investments?
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If a loss is sustained at the time the investor needs those funds, it doesn’t matter that if he would just wait for 10 or 15 years, he’d make the money back. How many retirees can afford to suffer a huge stock loss during retirement? If they aren’t allowed to draw upon their investments until they’re 67 or older, and at that point their stocks take a nosedive, how are they supposed to wait the 10 or 15 years before their portfolio climbs back to profitability? They might be DEAD in 10 or 15 years, especially if they can’t afford to EAT right or pay for health insurance!
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The Radical Right really are callous, inhuman scum. Their attitude really is, “So, maybe 20% or 30% of retirees lose their shirts and have to eat cat food, so what? The stock market needs their money, for bold innovation that might benefit all mankind — and make their investors rich along the way! So what if some of those bold innovations crash to the ground in flames, burning everyone who invested in them? In the long run, an investor with a diversified portfolio will make it up.” But what if they don’t HAVE a “long run” in which to make up a catastrophic loss? “That’s their problem”, I guess.
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People must not be fooled. The stock market is NOT safe. If you gamble, you can lose. The Social Security system and Medicare CANNOT gamble. They MUST be there when we need them. All attempts to trick people into moving their Social Security funds to the stock market must be STOPPED, with all necessary force . (Responsive to “The Real Debt” by Clark S. Judge, New York Post, August 28, 2004)
- posted by L. Craig Schoonmaker @ 3:33 PM