Actually, in one sentence. This tactic is being used in races all around the country. It’s the claim that (INSERT NAME HERE) Republican supported the privatization of social security-and if that plan would have been implemented-retirees would have lost half of their social security.
Patrick Murphy in Pennsylvania has a particularly bad example against his opponent Mike Fitzpatrick. The commercial ends with a rotund elderly gentlewoman looking sadly into the camera and saying something like “Mike Fitzpatrick…I can’t live on half of my social security.”
You get the premise—the market has been a nightmare for the past few years.Therefore, if you had a privatized fund, you’d be screwed! This is so completely dishonest it’s hard to list all the ways…but let’s try.
(This is pretty long-so, feel free to skip to the end for the one gigantic run on sentence to summarize all of the lies.)
1) If you are in retirement today—it is entirely IMPOSSIBLE for you to have lost ANYTHING if the privatization plan had been implemented. The social security “privatization” plan did not allow anyone under the age of 55 to participate in it when it launched. Even if you wanted to. PERIOD.
2) Let’s ignore that. If you could have joined…then would you have been forced to lose 50%? No…even when implemented, you would have had to volunteer to be enrolled in it. It was optional. You could not have lost money unless you volunteered for the program.
3) Let’s ignore that. If it was mandatory…and you were exactly 5 years before retirement when the plan was implemented 5 years ago, and you were forced into the program-what would have happened? Would you have lost 50%? Nope. “Why not? The market did drop by about half!” True. But, it also bounced back. And you would have been buying it when it was low. In fact, you would have bought the market at an average of about 10,959 over those five years. So, if you emptied the account all at once today, you’d actually STILL be up about 1.3%–even after the worst financial collapse since the great depression. Oops.*
4) Let’s ignore that. Let’s assume that the market can’t rebound. Let’s assume you were forced at gunpoint to sell at the lowest possible market level in the last five years. Would you lose 50% then? Nope. Why? You could only invest $1,000 per year in the privatized part of the plan. Even including yearly increases that wouldn’t have kicked in back then, the maximum you could have invested in the privatized fund since 2005 would have been about $1,210 per year. Even in a world where you could only sell your privatized fund at the lowest point in the market-you’d only be down about $3,600-about 1% of the expected social security payout of someone retiring today.
5) Let’s ignore that. What if the plan was fully implemented-so there weren’t those pesky yearly limits. Could you lose 50% then? Nope. The absolute maximum you could ever invest in the privatized part of the plan would be about 32% of your social security. Meaning that over 68% of the fund would remain the exact same as it is now. Therefore, even if you had invested every penny possible into your privatized plan over a lifetime, and you pulled it out on the day the market dropped to half of the average you bought it at, you still would only lose 16%.
6) Let’s ignore that. 16% is still a lot-right? It sure is, the only problem is-the plan made it essentially IMPOSSIBLE to lose 16% in this situation. Why? Because, even if you were a complete moron who wanted to pull out all of your money on the worst possible day that the market would allow—the rules wouldn’t allow it. As the plan specifically stated: “Personal retirement accounts would not be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits.” So, even if you were the most unlucky person on the planet-the plan would stop you from losing all of that money-because you’d have to ride it out over time, allowing the market to bounce back.
7) Let’s ignore that. Let’s say you had no memory of all that we’ve learned so far. “All of your money is at risk in the market! And if you pull it out at the worst possible time, you’d lose 50%!! PANIC!!” Ooooh…sorry. Actually, the plan would automatically transfer you out of the riskier fund beginning about 18 years before retirement, unless you specifically told them to do otherwise. Cass Sunstein fans celebrate-you’d have to specifically veto the nudge of a less risky plan to be more risky.
8) Let’s ignore that. Sure, every other argument of a 50% loss has been completely demolished—but what about if people started taking the funds out early ? Ooooops again. If I may quote: “American workers who choose personal retirement accounts would not be allowed to make withdrawals from, take loans from, or borrow against their accounts prior to retirement.”
9) Let’s say they ignored all of that and went in another direction…(which they have to do when pressed.) Every one of these candidates knows that this “blame the market” approach is complete and utter BS…even in the worst economic times we’ve experienced in the past 50 years. So, instead, they say Bush wanted to decrease benefits. Wrong. He proposed that benefits be indexed to inflation-essentially guaranteeing that they would never be decreased.
10) Let’s ignore that, and instead act like indexing to inflation is a cut. How? Well, they try to stake their claim on the way Bush was indexing the increases in benefits. Bush basically said “index the benefits to inflation”-while they are now indexed to wages. So, because inflation usually rises at a slightly slower rate than wages-the Bush plan is supposedly “cutting” benefits compared to what they would have been if they were indexed to wages. Get it? So, it’s not a cut at all, it’s only a cut from what benefits would have been if you had indexed them at a higher rate.
11) Let’s ignore that. Let’s say that they actually believe that indexing something to inflation is completely unfair. Well-then we finally find our 50% cut…right? Wrong. That’s actually still not based on the plan Bush supported. His indexing was more of a hybrid, in between the “wages” and “inflation” measures. Bush’s inflation-indexing-horror-show would only fake-cut benefits by 28%…not 50%. By the way, all of these “cut” numbers come from the completely objective source of Barack Obama’s own economic advisors.
12) Let’s ignore that. Even if you disregard all of this-even if you ignored all of the clauses in the law that would stop these disastrous events– could the lady in the ad REALLY see a 50% cut in her benefits?? ? Sure. But, she would have to live to be 130 years old. You see, these percentages of the fake-cut wouldn’t occur until the year 2075—again-according to Obama’s own advisors.
13) Let’s ignore that. No, we’re not done. Because to get that 50% cut, in 2075, you’d have to ignore the long-term gains of the privatization plan. I’m not going to go through the hassle of running the numbers of 65 years of investments, but rest assured you’d be able to beat the 1.2% return of social security by quite a bit. Especially considering the Dow is up over 7,200% in that time.
Of course, the actual return on social security isn’t 1.2%–it’s negative. There’s already nothing left-it’s all been spent by the government in other places. But, if you’re worried that you’re going to wind up with nothing unless someone implements a plan like privatization—don’t. Ending up with nothing—is actually far better than what we’re going to wind up with. We’re getting debt. Trillions of dollars worth. We will pray for the blessing of only receiving nothing.
So, now that I’ve turned one sentence of a commercial into well over 1,000 words–what have we learned about this claim (in one run-on sentence)?
As long as you ignore that you had to be less than 55, and that the plan was completely optional, and that you’d still be up if it started in 2005, and that you couldn’t invest more than $1,000 per year, and that you could never invest more than a third in privatization, and that you couldn’t empty the fund all at once, and that you’d be transferred out of a risky fund automatically as you neared retirement, and that you couldn’t empty the fund early, and that benefits wouldn’t be cut, and that Bush didn’t support the type of indexing they’re referring to, and that they mysteriously doubled the non-existent cuts, and that it would only effect someone today if they lived to 130 years old, and if you ignore the long term track record of the market, and if there was any actual money left in social security, and we could pay for it—then the commercial was completely truthful. Good job democrats!
*(Using the Dow as a simplified tool throughout.)