[lbo-talk] Roubini on SS Privatization: Mother of All Con-Man Smoke-and-Mirrors Shell-Games

[ira glazer]

This article is a little dated (Nov 28, 2004), but considering who the author
is -- among other positions (currently prof at NYU) he has been a long-time
consultant to the IMF -- the choice of terminology is very interesting.

November 28, 2004

Social Security Privatization as the Mother of All Con-Man Smoke-and-Mirrors
Shell-Games

As widely reported by the press, a partial privatization of Social Security
via the creation of private accounts is one of the top policy priorities of
the Bush II administration.

But when you carefully look at the facts, it becomes clear that the proposed
partial Social Security privatization is literally a Con Man Smoke-and-Mirrors
Shell Game that - in the form it has been proposed - will not lead to any of
the alleged benefits argued by its supporters. It is amazing the amount of
misinformation that one reads about social security privatization; apologists
argue that:

- The current pay-as-you-go (PAYGO) Social Security system is bankrupt.

- Privatization would increase national savings and the accumulation of
capital and thus lead to higher long run income and growth.

- Privatization would lead workers to be able to invest into higher return
equities rather than the low return public debt of the current system.

- Privatization would be self-financing and have no long run transition costs
as you reduce the large future implicit liabilities of the current system, in
spite of the fact that you are creating large transtion costs via
privatization. So, it is a free lunch.

Each of those statements is incorrect once you do the math...

http://www.roubiniglobal.com/archives/2004/11/social_security_1.html