Social Security Reform Could Help the Poor

Posted by: Good Samaritan
on April 11, 2005 @ 03:37 PM EST

I liked Barbara Ehrenreich's book Nickeled and Dimed, even though I disagreed with a lot of her assumptions and conclusions. I can respect a liberal who actually lived for a while among the people liberals habitually profess to care about. In a recent interview with BuzzFlash, she comments:

As we speak, there is an incredible assault going on, not just on the poor, but also the middle class, especially with the campaign to privatize Social Security...

I can't figure it out. The Social Security privatization campaign Bush is currently running does not have strong popular support. People don't want it. Even Wall Street isn't enthusiastic about it. And it's not going to save money. It's going to cost, I think, about two trillion dollars just in transitional costs because some workers will take their money and put it in private accounts. The government will have to make up for that to pay for those currently depending on Social Security. So it doesn't make sense. I almost think there's a philosophical point they want to drive home, which is that they don't like anything that involves some kind of mutual risk-sharing -- you know, pooling our wealth to help each other. There's no other way I can explain it to myself.

If Ehrenreich could "figure out" Social Security reform, she might realize a few things. MORE

First, what she calls "transitional costs" are not costs at all. Rather, unfunded liabilities are converted into explicit debt, which is an improvement in the government's accounting practices.

Second, Ehrenreich should know that the payroll tax is the most regressive tax on the books. The poor people she worked with for a year did not pay income tax, but they paid the payroll tax. She should also know that the poor suffer from inadequate wealth even more than they suffer from inadequate income. Many of the people she met working low-end jobs lived in motels because, even though hotels were more expensive on a monthly basis, poor people lacked the capital to pay the deposit, first month's rent, and other up-front charges associated with renting.

If individual retirement accounts (IRAs) were set up so that people who had enough for an annuity of, say, 120% of poverty level, could withdraw and/or borrow against any surplus in their IRAs, poor people who had been in the labor force for a few years could use this leverage to get out of motel rooms and into apartments. And if Democrats would concede the principle of IRAs, they could negotiate to maximize the benefits the poor will derive from increased ownership.

The Social Security does two things that should outrage any progressive: it taxes the poor, and it funnels money to the well-off. Ehrenreich should know better than to whitewash this program with a euphemism like "mutual risk-sharing."

E-mail this entry to a friend.

[Previous entry: "Not politics: Affordable Housing"] [Next entry: "'Hate Products' From The Left"]