[Marxism] Chile and Social Security
lnp3 at panix.com
Tue Apr 26 08:54:37 MDT 2005
Lessons for Proposed U.S. Social Security Reform:
25 Years Reveal Myths of Privatized Federal Pensions in Chile
By Manuel Riesco | March 10, 2005
Americas Program, Interhemispheric Resource Center (IRC)
The privatization of pensions in Chile enacted by the dictatorship of
Augusto Pinochet in 1981 has been hailed worldwide as a success story, and
U.S. President George W. Bush recently said that it was "a great example"
for social security reform in the United States .
Some champions of Chile's system make ideological arguments: It is a
preferable system because it depends on private property, free choice, and
personal responsibility; it links individual contributions with benefits,
and personal effort with rewards. Other proponents argue on the basis of
financial and actuarial calculations: At 4% yearly rates of return, saving
10% of salary throughout a career can afford a pensioner some 70% of salary
at retirement. A recent argument has been added that seems tailor-made for
U.S. consumption: The system entitles a foreign migrant worker to keep
pension savings even upon leaving the country at retirement. Nevertheless,
the Chilean private pension system has proven itself unable to keep its
bright promises. A quarter century after its inception, most pensioners
find themselves shortchanged, while the public coffers continue to carry
most of the burden of federal retirement benefits.
NY Times, April 26, 2005
The Proof's in the Pension
By JOHN TIERNEY
I made a pilgrimage to Santiago seeking to resolve the Social Security
debate with a simple question: What would Pablo Serra do?
I wanted to compare our pensions to see the results of an accidental
experiment that began in 1961, when he and I were friends in second grade
at a school in Chile. He remained in Chile and became the test subject; I
returned to America as the control group.
By the time we finished college, both of our countries' pension systems
were going broke. Chile responded by pioneering a system of private
accounts in 1981. America rescued its traditional system in the early
1980's by cutting benefits and raising taxes, with the promise that the
extra money would go into a trust to finance the baby boomers' retirement.
As it happened, our countries have required our employers to set aside
roughly the same portion of our income, a little over 12 percent, which
pays for disability insurance as well as the pension program. It also
covers, in Pablo's case, the fees charged by the mutual-fund company
managing his money.
I visited Pablo, who grew up to become an economist, at his office at the
University of Chile and showed him my most recent letter from the Social
Security Administration listing my history of earnings and projected
pension. Pablo called up his account on his computer and studied the
projected retirement options for him, which assume that he'll keep working
until age 65 and that the fund will get an annual return of 5 percent
(which is lower than its historical average).
After comparing our relative payments to our pension systems (since
salaries are higher in America, I had contributed more), we extrapolated
what would have happened if I'd put my money into Pablo's mutual fund
instead of the Social Security trust fund. We came up with three
projections for my old age, each one offering a pension that, like Social
Security's, would be indexed to compensate for inflation:
(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That
would be more than triple the $18,000 I can expect from Social Security at
(2) Retire at age 65 with an annual pension of $70,000. That would be
almost triple the $25,000 pension promised by Social Security starting a
year later, at age 66.
(3)Retire at age 65 with an annual pension of $53,000 and a one-time cash
payment of $223,000.
You may suspect that Pablo has prospered only because he's a sophisticated
investor, but he simply put his money into one of the most popular mutual
funds. He has more money in it than most Chileans because his salary is
above average, but lower-paid workers who contributed to that fund for the
same period of time would be in relatively good shape, too, because their
projected pension would amount to more than 90 percent of their salaries.
By contrast, Social Security replaces less than 60 percent of your salary -
and that's only if you were a low-income worker. Typical recipients get
back less than half of their salaries.
The Washington Post, March 2, 2005
'Contrarian' Voice Joins N.Y. Times Op-Ed Page
by Howard Kurtz, Washington Post Staff Writer
When John Tierney wrote a cover story for the New York Times Magazine
titled "Recycling Is Garbage," the reaction was fierce.
One critic sent him a box filled with garbage.
The 51-year-old reporter will have a prime opportunity to keep stirring
things up after being named yesterday to the newspaper's op-ed page,
succeeding William Safire as a columnist. A self-described libertarian,
Tierney has mused about the privatization of Central Park (complete with
turnstiles) and attacked commuter rail under the headline: "Amtrak Must Die."
"I don't like to make people angry for the sake of being angry, but I want
to challenge people's assumptions," he says. As for his political views,
"my gut feeling is that most people outside the Beltway can solve most of
their problems without guidance from us."
The Times has been grooming Tierney for years. A veteran of the old
Washington Star, he began writing the "Big City" column in 1994 -- first
for the Sunday magazine, then twice a week for the Metro section -- before
moving back to Washington in 2002. Tierney was handed the paper's campaign
digest column, "Political Points," last year.
Editorial Page Editor Gail Collins says she likes Tierney's "contrarian"
approach. She says he was not tapped to fill a "conservative" slot -- the
only other columnist on the right is former Weekly Standard writer David
Brooks -- but to broaden the "mix" of the generally liberal opinion pages.
"He's just a very interesting thinker," Collins says. "He thinks outside
the box, has a very distinct worldview and I think he'll be a lot of fun. .
. . He'll be writing about stuff in ways that no one else on our team does."
Tierney has pulled his share of stunts as a columnist. When Hillary Rodham
Clinton and Rosie O'Donnell were attacking then-Mayor Rudy Giuliani for not
allowing the homeless to sleep on New York's sidewalks, Tierney donned
scruffy clothes and tried to sleep outside their homes (a security guard
banished him from O'Donnell's gates). To test the reaction of cabbies, he
once put on a ski mask, told them he had just robbed a bank and asked them
to step on it (no one much cared). After New York was dubbed the nation's
rudest city, he went to Nashville and posed as a blind panhandler with a
rap-blaring boombox to see who would give him money (few did). But even
Tierney's prank columns made serious points that brought them "closer to a
series of briefs for laissez faire," the liberal American Prospect said in
a profile. "In his breezy attacks on rent control, his advocacy of
school-voucher programs and workfare, and his conceit that norms can be
bought, he sides again and again with the free market and personal
initiative." That, by the way, included a defense of strip clubs.
This piece last year, about his migration to Chevy Chase, captures the
flavor of Tierney's philosophy:
"I don't like even my own car. For most of my adult life I didn't even own
one. I lived in Manhattan and pitied the suburbanites driving to the mall.
When I moved to Washington and joined their ranks, I picked a home in
smart-growth heaven, near a bike path and a subway station. Most days I
skate or bike downtown, filled with righteous Schadenfreude as I roll past
drivers stuck in traffic. The rest of the time I usually take the subway,
and on the rare day I go by car, I hate the drive.
"But I no longer believe that my tastes should be public policy. I've been
converted by a renegade school of thinkers you might call the autonomists,
because they extol the autonomy made possible by automobiles."
"When I first knew him he was a very left-wing guy," says Forbes FYI Editor
Christopher Buckley, who met Tierney at the Yale Daily News and is
co-author of their novel "God Is My Broker: A Monk Tycoon Reveals the 71/2
Laws of Spiritual and Financial Growth."
"But he was too bright to remain so. He was affronted early on by the
featherbedding he saw in unions. Now he's known as a house conservative at
the New York Times."
Tierney has reported from six continents, including a stint in the Times's
Baghdad bureau, and has written for magazines ranging from the Atlantic and
Esquire to Rolling Stone, Vogue and Science, where he was a staff member
for five years. The question now is how he adapts his style to the rarefied
world of the op-ed page.
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