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View Diary: Graphing Rising Income Inequality, the Trademark of Neoliberalism (282 comments)

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  •  Natural Philosophy of The Bandits (2+ / 0-)
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    PlutocracyFiles, tote

    I've complained any number of times in these pages and elsewhere about The Bandits--the group of people that are looting our country. This their philosophy. And by pushing it through Congress (essentially while the American people were elsewhere) they have rigged our system to pour the public funds into their pockets.

    I want to take aim at one particular point (in Philoguy's diary, actually) which is:

    Private business is efficient and therefore the best way to solve our problems.

    This is important and well worth fighting. The implication is that government services should be outsourced to private businesses. Nothing could be further from the truth, or more wrongheaded economically. You can see that by just thinking about this proposition:

    We are going to bear all of the costs of doing a government service, and then on top of that we are going to pay a profit.

    This would only make sense if private enterprise were so damned efficient that the efficiency gained by it would more than make up for the profit. But this is never the case. Government actually provides a very efficient way of doing things.

    Take a look at retirement savings, for example. The Social Security Administration has an overhead of less than 1%. That means that of the money collected for retirement savings by our government, less than one cent on the dollar goes for administrative costs.

    But where are you going to get that in the free market? The typical cost of financial services to squirrel away your money for retirement is 2-3%. This is the finance charge that Wall Street demands for managing your money.

    Where is the efficiency? Well, neoliberals will tell you that you will get a higher return on investment because the SSA just invests in T-bills, but Wall Street invests in the broader market. The only problem with that is that it isn't retirement savings because it puts your money at risk. When you are saving for retirement you cannot put your money at risk because if you get to 75 and you're out of money, you can't go back and play the market again.

    So, the only feasible strategy for retirement savings is to put your money into the safest investment you can, which turns out to be T-bills (still).

    Why does private retirement investment cost you more than public retirement investment (i.e., Social Security). Because someone is making a profit from private investment, but the government doesn't have to.

    It is always the case that when you outsource government services you are paying to provide the services and then you are paying a profit on top of that. It makes no economic sense, and we should always point this out when dolts come to us and propose that we "privatize" Social Security. Or anything else.

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