Tuesday, December 28, 2004

"The American democratic experiment will succeed until the people realize they can vote themselves money from the public treasury. Then it will collapse." - Alexis de Tocqueville, 1848

The quote above has often been used by the right as an indictment of the welfare state. These are the folks who believe that the collapse of the American experiment was set in motion in the mid-1930's by FDR's New Deal.

I (as you could guess) disagree. Rather than bring about the collapse of democracy, I think the period ushered in by FDR was perhaps our greatest period. In my many years of studying politics and public policy in college, as a graduate student, and as an adult involved with such professionally, I never saw the creation or expansion of AFDC/TANF, Food Stamps, Social Security, Medicare, (etc.), as the people voting themselves money from the public treasury. To put it bluntly; those who were on the receiving end of such "benefits" have rarely even gotten close to holding enough power to pull off such a coup.

But that doesn't mean that de Tocqueville didn't make a point that's worth heeding. I do see the start of what he warned about, over 150 years ago, in the plans of the current administration. Whether or not making the Bush tax cuts permanent is voting themselves money from the public treasury is debatable, but one would have to be completely and willfully blind to not see that the plan to privatize Social Security is nothing but the gang in charge robbing the treasury for its own greedy ends.
Make no mistake; they have no intention of "saving Social Security." What these cynical bastards want to do is simply pump up the worth of their own stock portfolios with your retirement money. It's basic supply and demand; more money pumped into the market (the Social Security reserve) raises demand. Supply remains the same, and so increased demand leads to increased share prices. The wealthy get wealthier on your dime.

So what's so wrong with that? Doesn't it make us wealthier too? Only if you already own a large amount of stock, and only if you're of an age where you are getting ready to retire soon. It will not increase Social Security payments. They are set by Congress in law, not automatically adjusted based on the worth of the "portfolio."

And then there's the other end of supply and demand. And that's where the majority of us, who are at least a decade or two (or more) away from retirement get screwed. This is because of that huge group known as the Baby Boomers, and the fact that there are so many more of them than there are of the generation behind them.

As the number of retired people increases, both as an absolute number, and in proportion to the working population, the market will first slow, then decline, then collapse. Supply and demand. The supply of shares to sell will go up (as retirees cash in their portfolios to pay their bills), and the demand will go down (a smaller contingent of workers in the next generation), causing stock prices to fall.

It's the same problem Social Security is facing already; the baby boomers bankrupt the system no matter what the system is - but especially and most dramatically if it's one tied directly to the ups and downs of the stock market.

Yes, technically I am a "Baby Boomer," born in 1961 at the tail end of the boom. But you really have to be born before, say, 1957 to fully take advantage of the Bush plan. They'll be breaking the system just a year or two before I'm ready to retire. My big brothers are beating me up again.

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