Date: Wed, 17 Jul 1996 11:45:41 -0500
From: dhenwood-AT-panix.com (Doug Henwood)
Subject: Re: Social Security


At 7:09 PM 7/16/96, Rahul Mahajan wrote:

>Doug, you're a smart guy, except when someone criticizes your work.

Since I'm infalliable, I take any criticism to heart.

>I'm obviously not a fan of privatized pension systems, but the choice here
>is between a private system that may just have less power to dictate terms
>to its employees and a completely coercive government policy that looks
>exactly like a deliberately instituted mechanism of class war.

This is wildly overstated. Public pension systems were a longstanding
demand of the socialist movement, as the World Bank recognized in its 1994
privatization blueprint, Averting the Old Age Crisis. The SS system has
sharply reduced poverty among the elderly, and is mildly redistributive
over the course of a lifetime. It is one of the few areas of social
provision where the U.S. is not an absolute disgrace.

>The payroll
>tax hits the working poor harder than almost any other single measure. To
>talk about "reforming SS" so that the tax structure will be progressive
>instead of so incredibly regressive sounds like reforming capitalism so it
>won't need to expand constantly. It's conceivable you can make a case for
>what you're saying, but you've got to try a hell of a lot harder than you
>did in your LBO articles.

Try a hell of a lot harder? Jesus, comrade, this is an issue I've put a lot
of time into. I don't know what point you're making here at all: we should
consent to the privatization of the system because it's regressively
financed now, and accept something even more regressive in its place? We
shouldn't care about SS because it's stinking reformism? By reducing the
sting of monetary discipline, SS weakens capital's power over people, which
is why Pinochet smashed it in Chile and why Cato & Wall Street want to
smash it here.

>The first part is trivially obvious. The whole question is about how
>"almost" the almost is. The second part was not made explicit. What are the
>SS administration's predictions about the covered wage share of the GNP?

It will decline; they explicitly assume that wage growth will lag
productivity, and that incomes will continue to polarize through 2070. The
taxable wage share of GDP is projected to fall from 42% now to 36% in 2070.
But since the difference between 1.4% compounded over 75 years and 2.0% is
so big - raising the growth rate by only 0.6 points to 2.0% yields a 53%
larger GDP 75 years hence; raising it to 2.5% (still below historical
norms) more than doubles it - that's where the real action is, not the
decline in the covered wage share.

>Are they consistent with the amazing growth of income disparity we're
>seeing? Give me some numbers.

Counteracting the trend towards polarization is the increase in the share
of the population working, meaning that wage income as a percentage of GDP
is pretty much flat, even as the hourly wage has declined.

Doug

--

Doug Henwood
Left Business Observer
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