Starting in the 1970s, governments authorized and promoted individual retirement accounts of various sorts. The commonly accepted explanation was that public pensions were no longer affordable and had to be supplemented or replaced by private saving. The truth, according to a revealing new paper, is that stock exchanges in developed countries promoted tax-advantaged private accounts as a quick way to build up domestic capital markets at a time of increasing global competition. The result has been an underfunded public sector—including cash-starved public pensions—and overfunded capital markets feeding unproductive financial speculation.
A wise person who had observed the private pension industry for many years once told me to remember that none of its structures—public pensions, employer-sponsored pensions, 401(k) plans, and every variation on these themes—are set up for the good of working people. They are products, designed to make money for the bank or insurance or mutual fund company that set it up and collects fees for managing and investing it.
That sensible, “follow the money” approach to understanding pensions informs an excellent new academic paper, “Feed the Beast: Finance Capitalism and the Spread of Pension Privatisation in Europe.” The authors, Marek Naczyk of Oxford University and Bruno Palier of the Centre d’Etudes Européenes at Sciences Po Paris, who first presented it at a conference last July, connect the dots to explain why the financial services industry in Europe first started pushing for pension privatization and why political leaders in these countries went along with the idea. Continue reading The Origins of Pension Privatization: A New Perspective
Since his reelection, President Obama has been talking about “reforming entitlements” every chance he gets –or at least when he’s talking to Republicans. But why – and when – did “entitlement” become such a nasty word?
Since his reelection, the president has been trying hard to have it both ways when it comes to Social Security and Medicare. According to the Huffington Post’s Sabrina Siddiqui, Obama on March 14 assured House Democrats that he won’t “slash” the two programs – moments after a meeting with Senate Republicans at which he reaffirmed his commitment to “reforming” entitlements, including adopting the chained CPI for calculating Social Security and Medicare.
Knowing it was poison to his constituency, Obama had more or less avoided the subject on the campaign trail last year. And as Continue reading Why is “entitlement” such a nasty word?
Vice presidential candidate Paul Ryan has been pushing Social Security privatization for the better part of a decade. What if his plan was actually implemented? An important new paper looks at what happened when Hungary and Poland attempted something similar with their national pension systems. The results were ugly.
It’s been reported that Paul Ryan is no longer pushing Social Security privatization. House Republican leaders “refused” to let their Budget Committee chair “add changes to Social Security” into the budget he wrote last year and that passed the chamber with solid GOP support. This year, he and his colleagues again “left the program untouched.”
That’s not quite true. Ryan has now written two budgets, both of which include Continue reading Pie in the Sky in Eastern Europe: The Ryan Plan in Action
Why is the Republican Party leadership so scared of Newt Gingrich? Putting aside his generally abrasive personality, his loud streak of megalomania, and his tendency to self-destruct – OK, that’s a lot! – it’s hard to think of much in the way of substantive policy matters that sets the former House speaker apart from the rest of the Republican presidential field.
Oh yes, there’s one thing.
Early last month, when it still seemed that Mitt Romney’s anointment as GOP nominee was a matter of course, the editors of the Wall Street Journal took Gingrich for his position on, of all things, Social Security. The Journal has been pushing for Social Security privatization for decades, but strangely, Continue reading Newt Gingrich Can’t Get With the Program