Retirement Roulette

Posted Oct. 02, 2008, at 6:13 p.m.
Last modified March 20, 2011, at 3:24 a.m.

When he won re-election in 2004, President Bush asserted that he had won a mandate from the voters and earned political capital. A short time later, Mr. Bush spent that capital on a proposal to privatize Social Security. The idea gained little traction with the public and even less with Congress, and the President, after hawking the plan around the country for months, finally dropped it. With the Dow Jones stock index dropping 778 points on Monday, the question “What if?” comes to mind.

If Americans had been able to put the equivalent amount or some percentage of their Social Security deductions into the stock market, many — especially those within a few years of retirement — could be facing financial disaster today. Supporters of the privatization argue that such a plan would allow shrewd, responsible investors to make more money for their retirements through the stock market. But the other side of the coin is that for every big winner, there likely would be big losers.

Those who do not know history — or have rewritten it — must be reminded that Depression-era programs like Social Security were created because the country would no longer tolerate seeing destitute elderly people. The “poor house” wasn’t figurative, it was a real place, and if the elderly poor were not able to live with their children, they were at the mercy of charities that might provide rudimentary housing and food.

With the mortgage crisis recalling the Great Depression, many eyes are turning back to President Franklin Roosevelt’s response to that crisis. Social Security was one of the measures he took to ensure a better future after banking collapses and the stock market crash.

One of those looking back today at President Roosevelt’s response to the financial crises of his day is Rep. Dennis Kucinich of Ohio, an unapologetic progressive Democrat. On Tuesday, Rep. Kucinich suggested on MSNBC that instead of borrowing $700 billion from banks to then give (or loan) to banks, the federal government should take “a page out of classic New Deal economics” and help the consumers, not the lenders.

Millions of homeowners can’t pay their mortgages, he said, so the federal government should consider creating a body like the Depression-era Home Owners Loan Corporation to buy controlling interest in the so-called toxic mortgage securities and help homeowners re-negotiate payment plans.

Even as FDR’s legacy is being waved about by different people with very different agendas, Rep. Kucinich likely will not see much support for applying one of that president’s fixes to the current problem.

The idea of privatizing Social Security will likely rear its head again. The words from a November, 1936 government pamphlet explaining the then-new program are perhaps the best response:

“What you get from the Government plan will always be more than you have paid in taxes and usually more than you can get for yourself by putting away the same amount of money each week in some other way.”

Words worth remembering, both when the market is down and up.

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