Thomas Frank on Privitzing Social Security

On page 259-260 of The Wrecking Crew, Thomas Frank explains the effects of privatizing social security, a program being supported by House Republican Pat Ryan for the next Congress. I have never read such a succinct explanation of the rationale and the dire consequences of such a drastic policy move.

" The shimmering dream of privatizing Social Security, though, remains the great unreachable winger prize, and the right persists in the campaign regardless of the measure's unpopularity or the number of political careers it costs. President Bush, for example announced privatization to be his top priority on the day after his reelection in 2004, although he had not emphasized the issue during the campaign and although,in statistical terms, almost nobody had voted for him for this reason. He proceeded to chase the issue deep into the land of popular unpopularity , a region from which he never really returned.

" He did this because the potential rewards of privatizing Social Security justify any political cost. At one stroke it would both defund the operations of government and utterly reconfigure the way Americans interact with the state. It would be irreversible, too; the "transition costs" in any scheme to convert Social Security are so vast that no country can consider incurring them twice. Once the deal has been done and the trillions of dollars that pass through Social Security have been diverted from the U.S. treasury to stocks in private companies, the effects would be locked in for good. First, there would be an immediate flood of money into Wall Street, boosting the net worth of the wealthy and lifting the boats of the various brokerages and mutual fund companies who would handle the millions of new private accounts. Second, there would be an equivalent flow of money out of government accounts, immediately propelling the federal deficit up into the stratosphere and defunding a huge part of federal activity/

" The overall effect would be to marketize the nation's politics,elevate forever the cold rationale of the financial markets over such vague liberalisms as the common good and the public interest. The prctical results of such a titanic redirection of the state are easy to predict, given the persistent political demands of Wall Street: low wage growth, even weaker labor organizations, a free hand for management in downsizing, polluting, and so on. To hand Social Security over to Wall Street would be to enshrine these demands as the foremost objects of economic policy. After all, who is going to legislate higher minimum wages or safer food or cleaner air when such legislation can be construed as an attack on the portfolios of the nation's beloved seniors? Not only would privatization change the soul; it would permanently reverse the political valence of the famous "third rail of American politics,"transforming Social Security overnight from the bane of the business community into its most powerful weapon. Touch Wall Street and your're dead."

I think that sums it up rather nicely.