Pensions and Penury: the Galveston Experiment Prepares to Go National

The Guardian (UK) ^ | February 28, 2005 | Julian Borger

[anymouse]

Bush plan to follow Texan lead in ending social security splits US

The island of Galveston, just off the Gulf coast of Texas, does not have a happy place in American history. In 1900 it was the site of the worst natural disaster in US history, a hurricane that killed more than 6,000 people. Half a century later two ships laden with fertiliser exploded, incinerating 600 locals and levelling much of Texas City on the other side of Galveston bay.

Now Galveston is in the process of becoming famous once more. No one has been killed this time, but the impact on the rest of the country could be far greater.

It began in 1981, when the old cotton port and two neighbouring counties decided to opt out of the federal pension scheme, known as social security, and set up individual investment accounts for county employees.

The decision was hardly noticed outside southern Texas at the time, but it has now taken on national significance. President George Bush has committed his second term in office to doing across America what Galveston county did 24 years ago.

There is no governmental institution more central to American everyday life than social security. Since 1935, when Franklin Roosevelt established the scheme as a central pillar of the New Deal, almost every American has contributed to it and drawn from it.

In almost every transaction, from applying for a mortgage, to buying a gun or adopting a dog, people identify themselves by their social security number.

It is a sacred cow of the American way of life and President Bush wants to slaughter it, or at least stick the first knife in. He proposes to begin privatising the system, allowing Americans to divert some of the money they would have paid in social security contributions into personal investment accounts.

It is likely to be the biggest ideological battle for a generation, in which armies of lobbyists, propagandists and activists - every bit as mighty as those who fought over the decision to invade Iraq - are being assembled and sent into the field.

In the eyes of reformists it marks the decisive showdown between the forces of liberalism and conservatism. Privatisation, they predict, will ultimately replace a generation of state dependants with a generation of independent stockholders, and in so doing create an unassailable Republican majority.

"Bush has a real opportunity of creating a generation of Republican voters by creating a culture of owner-capitalists," said Stephen Moore, president of the Club for Growth, a free-market pressure group, and a prominent Bush ally. "There will be an increase from 50% to 90% of American [adults] holding stock. That's a huge increase in the proportion of shareholders who realise what's good for America is good for them."

Grover Norquist, president of Americans for Tax Reform, and a leading Republican strategist, put it this way.

"If 100% of Americans at age 18 knew they were going to retire with a savings account, it would change their attitude to regulating companies, it would change attitudes towards envy, and how they feel about rich people," he told the Guardian.

"The entire secular growth in the Republican vote can be explained by the growth of stock ownership. It changes what you read, what you watch, and what you think."

It is in this heady, high-stakes atmosphere that Galveston and a retired court clerk called Evelyn Robison have found themselves in the eye of the gathering ideological storm.

While local civic leaders say the Galveston experiment represents a triumphant model for the country, Mrs Robison, who retired last year after 45 years' service, insists the scheme has left her about $250 a month worse off than if she had been allowed to stay in social security.

"They promised we would get three to four times as much as social security but ... I do not know one person who came out ahead," she said. "This is not the model they should use."

Though she walks with the aid of a cane these days, Mrs Robison speeds around town to rail against the Galveston plan, and encourage the more timid of the retired to speak out.

Rick Gornto was one of the Galveston plan's founders and is now president of First Financial Benefits, which administers the scheme. He sighs when he hears Mrs Robison's name and points out that she withdrew $40,000 from her account five years before her retirement to pay for heart surgery for her husband, under a clause allowing early withdrawals in cases of hardship. It inevitably reduced her pension.

"I realise we allowed people to take money out and that may have caused these problems. And we have now changed those hardship provisions," Mr Gornto said. He argues that, such special cases aside, the scheme has generated average returns of more than 6% over its 24 years and made everyone involved better off.

Mrs Robison insists that she has taken her special circumstances into account when comparing the two systems. Her former deputy, Joyce Longcoy, made no early withdrawal and also claims to be several hundred dollars a month worse off.

"How can this be a model?" Mrs Longcoy said. "You can't have what happened to us happen to the whole country."

The critics point to a 1999 study by the General Accounting Office, the investigative arm of Congress, which found that low earners tended to fare worse under the Galveston plan than under social security. It also found that people did better with social security if they lived longer, because the federal system is indexed to inflation. The private plan is not.

For a debate that is supposed to be based on hard numbers, the precise dollar figures are extremely hard to pin down.

Two fundamentals are beyond doubt, however. Firstly, privatisation will offer higher potential benefits in return for greater risk - more so in the Bush plan, which would include stocks, than in the Galveston plan, which is based on bonds.

Secondly, social security involves a significant element of redistribution, because high earners help fund the pensions of the poor, who receive more than they pay in. In a privatised system, it is everyone for himself.

"It presumes you don't have a responsibility to anyone else in society," said Eric Kingson, a social work professor at Syracuse University, who has analysed the Galveston plan and is a critic of the president's proposals.

Mr Norquist, one of the primary architects of the Republicans' low-tax, free-market agenda, concedes that a privatised system "would end redistribution" but he argues: "The poorest person would be better off than in social security."

Although Mr Bush may not be able to push his plan through Congress this year, demographics and economics are inexorably pushing the country in his direction, Mr Norquist says.

When the tipping point comes, the president's backers say, it will trigger the most profound social change America has seen since the New Deal.

"I think Bush is going to fashion himself a 21st century Franklin Roosevelt," Stephen Moore said. "This is a question of his legacy."

[anymouse]

Come on down to GalvestonCountyGOP.com and see how we are kicking Democrats out of office. Retirement finance reform is only one area that we are on the forefront of conservatism.

Remember Lt. Col. Oliver North will be speaking in Galveston on March 19th. Get your tickets at LincolnDayDinner.com .

[anymouse]

Galveston ping.

[america-rules]

If this lady didn't take 40 k out for her husbands heart bills would be costing her several hundred more in interest payments so she did better not having social security. Also, if he dies she won't lose any income like she would with social security.

[Fiddlstix]

BTTT

[KarlInOhio]

Did the Galveston plan have the income redistribution method of calculating benefits that SS has, or are the accounts proportional to what you put in and thus proportional to income? If you get out what you put in, it wouldn't suprise me that someone at the low end of income would come out worse. Tricky the way the Dems leave out the $40k withdrawl.

[Richard Kimball]

Weird. I spent twenty years in a private pension fund and ended up taking home 70% of my after taxes salary at age 45. Started a second career. Of course, we used a diversified investment strategy in our pension fund, and I put 15% in, matched by the city. Also, when the city manager started looking at the fund and licking his lips, and tried to order us to invest it in low interest loans for low income families, we told him to buzz off. Private pensions will only work if they're administered by people who have a stake in the outcome, and use sound investment strategies. Way too many companies have ripped off the pensions of the workers to fund golden parachutes for the transitory CEOs. Cities will do the same thing. So will the Feds.

[Hillarys Gate Cult]

Somebody correct me if I'm wrong, but I thought the plan used as the example for privatization was the one Houston uses, not Galveston. The Houston plan works IIRC.

[anymouse]

HGC, you are mistaken. The Galveston County privatized pension program is often cited as the model the President favors.

The Houston pension system is a major disaster in slow motion. They had to have a public referendum to vote in escape clauses to keep the Houston pension benefit escalation from bankrupting the city. What a difference about 30 miles makes.

[chaosagent]

Nope.

It's the Galveston County plan.

The City of Galveston is regular SS.

Houston is also regular SS and a retirement plan.

[MeekOneGOP]

Pensions and Penury: the Galveston
Experiment Prepares to Go National

Excerpt:

In almost every transaction, from applying for a mortgage, to buying a gun or adopting a dog, people identify themselves by their social security number.

It is a sacred cow of the American way of life and President Bush wants to slaughter it, or at least stick the first knife in. He proposes to begin privatising the system, allowing Americans to divert some of the money they would have paid in social security contributions into personal investment accounts.

It is likely to be the biggest ideological battle for a generation, in which armies of lobbyists, propagandists and activists - every bit as mighty as those who fought over the decision to invade Iraq - are being assembled and sent into the field.

In the eyes of reformists it marks the decisive showdown between the forces of liberalism and conservatism. Privatisation, they predict, will ultimately replace a generation of state dependants with a generation of independent stockholders, and in so doing create an unassailable Republican majority.

"Bush has a real opportunity of creating a generation of Republican voters by creating a culture of owner-capitalists," said Stephen Moore, president of the Club for Growth, a free-market pressure group, and a prominent Bush ally. "There will be an increase from 50% to 90% of American [adults] holding stock. That's a huge increase in the proportion of shareholders who realise what's good for America is good for them."

Grover Norquist, president of Americans for Tax Reform, and a leading Republican strategist, put it this way.

"If 100% of Americans at age 18 knew they were going to retire with a savings account, it would change their attitude to regulating companies, it would change attitudes towards envy, and how they feel about rich people," he told the Guardian.

"The entire secular growth in the Republican vote can be explained by the growth of stock ownership. It changes what you read, what you watch, and what you think."

It is in this heady, high-stakes atmosphere that Galveston and a retired court clerk called Evelyn Robison have found themselves in the eye of the gathering ideological storm.

Please let me know if you want ON or OFF my General Interest or Texas ping list!. . .don't be shy.

[MeekOneGOP]

Pensions and Penury: the Galveston
Experiment Prepares to Go National

Excerpt:

In almost every transaction, from applying for a mortgage, to buying a gun or adopting a dog, people identify themselves by their social security number.

It is a sacred cow of the American way of life and President Bush wants to slaughter it, or at least stick the first knife in. He proposes to begin privatising the system, allowing Americans to divert some of the money they would have paid in social security contributions into personal investment accounts.

It is likely to be the biggest ideological battle for a generation, in which armies of lobbyists, propagandists and activists - every bit as mighty as those who fought over the decision to invade Iraq - are being assembled and sent into the field.

In the eyes of reformists it marks the decisive showdown between the forces of liberalism and conservatism. Privatisation, they predict, will ultimately replace a generation of state dependants with a generation of independent stockholders, and in so doing create an unassailable Republican majority.

"Bush has a real opportunity of creating a generation of Republican voters by creating a culture of owner-capitalists," said Stephen Moore, president of the Club for Growth, a free-market pressure group, and a prominent Bush ally. "There will be an increase from 50% to 90% of American [adults] holding stock. That's a huge increase in the proportion of shareholders who realise what's good for America is good for them."

Grover Norquist, president of Americans for Tax Reform, and a leading Republican strategist, put it this way.

"If 100% of Americans at age 18 knew they were going to retire with a savings account, it would change their attitude to regulating companies, it would change attitudes towards envy, and how they feel about rich people," he told the Guardian.

"The entire secular growth in the Republican vote can be explained by the growth of stock ownership. It changes what you read, what you watch, and what you think."

It is in this heady, high-stakes atmosphere that Galveston and a retired court clerk called Evelyn Robison have found themselves in the eye of the gathering ideological storm.

Please let me know if you want ON or OFF my Texas ping list!. . .don't be shy.
No, you don't HAVE to be a Texan to get on this list!

[MeekOneGOP]

Whoops! I left the Texas screen names outta the first post there.

[onyx]

Well, of course, I am lost.
Too complicated and "foreign" for me to understand.
But if democrats hate it, it must be GOOD for the rest of us.

[MeekOneGOP]

Tis a complicated issue. If the 'RATS are sqawking, must be a GOOD thang, alrighty.

[onyx]

LOL!
Exactly.
SS is their "baby."
Of course even Grassley is considering higher payroll taxes.
What a dolt.

[GeronL]

bump

[MeekOneGOP]

Yep! Higher taxes we DON'T need. Ick!

[GW and Twins Pawpaw]

The dimbos have NOTHING to offer and their goose is cooked!!! The middle class has learned that one can invest in America and get a return. They then look at the money going into SS and asks "Where is our return?" I predict SS will be modified this year. I also predict it will be easier to get Federal judges confirmed next year as a result of the SS modification.

[bitt]

what will seal the deal is when more Americans realize that Federal employees and certain state and municipal employees have been paying into their own pension systems and have garnered 1000% more in their private funds than comparable to SS...
we want what they have.

[GW and Twins Pawpaw]

Yes, you are exactly correct. They will ask 'Why am I not getting the same kind of deal?' The average American needs to understand (and is beginning to do so) that the dimbos exist only to rip them off in the name of 'equality'. What the left does is ugly, repulsive, heartless, immoral, sadistic, and all those other behaviors they accuse the conservatives of being. Liberalism is a disease and I personally will be quite happy when it is forever scrubbed from the face of the Earth.