The REAL motive behind Social Security privatization...
Sun May 15, 2005 at 10:09:52 AM PDT
This analysis has been brewing in the back of my mind for a while, and finally surfaced fully formed while I was shredding reports on my 401K for last year.
A number of rationales have been provided for SS privatization: the funding crunch, the "ownership society", better rates of return, etc. Also it has been described as "welfare for Wall Street". But none of these address what would be really going on and who the real beneficiaries would be...
Think about what SS Privatization would mean to the stock market and mutual funds. Tens if not hundreds of billions of dollars would be pouring into the market, as much or more as when 401Ks began to be popular.
This would, given a relatively stable economy, result in a general bubble in stock prices. This would be presented as benefitting everyone.
However, there is a subtle wealth transfer mechanism going on here. Those who were already holding large shares of funds or large blocks of stocks would reap the benefit of the rising prices, while those who were late comers to the market (i.e., those working class folks whose SS money was fueling the bubble) would essentially see the buying power of their investment diluted in the price surge, much as inflation dilutes their purchasing power with respect to goods.
Thus the more affluent would reap a huge capital gain, while the working and middle class would receive a distinctly smaller capital gain that would only materialize over a much longer period of time. Therefore, privatization would result in a large net transfer of wealth from the working and middle class to the asset-owning class.
In that sense, SS privatization would be a giveaway to the rich that over time would potentially be on a par with some of the tax cuts they have received from the Chimperor and his minions. And this is an aspect of the whole scheme that nobody seems to be talking about.
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