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March 31, 2005

A Bad Argument Against Privatization

And the opportunity to create a real progressive vision for growth

There are many reasons privatization is based on bad economic assumptions, but Josh and Brad, along with a lot of other folks, are just wrong to argue that Social Security Trustee assumptions of low economic growth and high stock returns is incoherent. The liberal charge is that low growth inevitably means that the stock market will reflect lower growth.

Low growth in US in a high growth world: But that assumes the US is a closed economic system, a blind assumption that the US will continue to dominate the global economy and therefore be a mirror of global capital activity. But it's not unreasonable to imagine a future where an aging US population, increasingly dominated by retirement homes where most economic activity is low growth services to support those retirees-- even as dynamic economic activity and stock market profits shift to the billions of people in the developing world.

In that scenario, the US could experience low growth while its citizens live off high stock market returns off of growth in other countries.

Implicitly, this is the model of the social security privatizers. There's nothing incoherent about the model in that argument; it's just a lousy vision of a US future as a collective parasite on the rest of the world's economic activity. It's an almost unpatriot vision of US decline.

Reframing the debate: Arguing that those economic assumptions are incoherent is not the real argument against the privatizers. Instead, we should be castigating conservatives for assuming this US decline. Unlike the pessimistic conservatives, progressives should be arguing that with continued immigration continually rejuvenating our economy, our vision is of a US continuing to lead the world in economic growth and innovation.

Now, that would be a framing of the social security debate that would shift it from number crunching that is ignored by most voters to a much deeper argument over the future of our country. As I've argued, instead of the privatizers vision of diverting social security into investments in foreign companies (which is what the Trustees implicitly assume), we should be using the social security trust fund to invest directly in growth in the US.

The privatizers admit through their assumptions that "the market" means inevitable US decline. So let's argue that progressives have a plan to beat the market and use social security not only to preserve the retirement security of seniors but assure jobs and growth for the working population as well.

A Vision, Not Just Defense: I know, that goes against the "we don't need a plan" position of many progressives, but that's only a short-term win on the issue. Yep, it's good to have the Dems around in opposition to stop the real hair-brained plans of the GOP, the voters will say, but it's too bad they don't have any economic policies to help me keep my job. Which just leaves them without a strong positive reason to vote for progressive candidates.

Social security involves how this country will invest trillions of dollars over the next few decades. Conservatives want to hand it over to the casino of multinational corporations, footloose and willing to use it to drive down wages around the world to the lowest common denominator. A real progressive alternative would be to argue for using those trust funds to invest in rebuilding our companies rebuilding American physical assets, investing in American companies committed to high-wage growth, and in creating a future US economy far brighter than the dour assumptions of the Social Security Trustees.

For progressives more comfortable playing defense, that's a bit bolder than most have been willing to go, but if progressives want to not only regain power eventually but do so with a real governing majority, they need more than a strong defense; they need a vision of how to create jobs and raise wages for all Americans. And the debate on how to invest the social security trust fund is where they can begin building that vision.

Posted by Nathan at March 31, 2005 11:17 AM