Saturday, January 29, 2005

Privatization and Bigotry

As I have noted here, the recent claims by the Bush administration that Social Security treats African-Americans unfairly is false for several reasons. The essence of the administration's argument is that the lower life expectancy of African-Americans diminishes the value of the Social Security benefits they receive. The argument is based on a thoroughly discredited report by the conservative Heritage Foundation. Even as early as October of 1998, the Center on Budget and Policy Priorities offered this thorough critique. I recommend reading the entire CBPP report, but here are its main conclusions:
The Social Security Administration's Office of the Chief Actuary found that Heritage both overstated the payroll taxes that workers pay for Social Security and understated the Social Security retirement benefits that workers receive, with these errors being particularly large for African Americans.

Heritage inappropriately assumed that if Social Security is not privatized, it will be restored to long-term actuarial balance entirely by raising payroll taxes and that this tax increase will begin in 2015, a decade earlier than the Social Security actuaries project would be necessary.

Heritage failed to calculate the rate of return for the full Social Security system. It ignored Social Security disability and survivors benefits in making its calculations.

Heritage failed to factor in transition costs — the costs that workers would have to pay under a privatized system to continue financing the Social Security benefits of current retirees and near-retirees.

The Heritage estimates fail to take into account administrative costs, the fees that investment companies charge on individual accounts, and the costs of converting accounts to annuities, an omission that results in a substantial overstatement of the rates of return for individual accounts.

Heritage ignores the variation in rates of return that would occur with individual accounts and the likelihood that low-income workers and minorities would receive below-average rates of return.
Then, after dismantling a number of the false assumptions which undergird the case for privatization, the CBPP report concludes as follows:
The Heritage analysis suffers from large flaws. It understates the rate of return for Social Security and overstates the returns under individual accounts. When the deficiencies in the analysis are corrected, the African-American and Hispanic-American communities no longer are the winners Heritage portrays them as being under these accounts. They are more likely to be injured than aided by the elimination of Social Security retirement benefits and their replacement with individual accounts.
All of this analysis is important as a precondition to capture the essence of the problem in the Bush administration's rhetoric. These flaws in their argument are well-known; even the chief actuary of the Social Security Administration has written a memo pointing out "major errors in the methodology" of the Heritage report. To traffic these lies with the intent to mislead is bad enough, but consider the cynical assumption upon which the entire argument rests: that high infant mortality rates among African-Americans is expected to continue unabated for decades to come. Rather than treat the social inequalities in our health-care system as a problem to be fixed, President Bush is in effect establishing them as part of the permanent structure of our society. Paul Krugman notes this moral dimension of the argument in yesterday's NY Times:
What's really shameful about Mr. Bush's exploitation of the black death rate, however, is what it takes for granted.

The persistent gap in life expectancy between African-Americans and whites is one measure of the deep inequalities that remain in our society - including highly unequal access to good-quality health care. We ought to be trying to diminish that gap, especially given the fact that black infants are two and half times as likely as white babies to die in their first year.

Now nobody can expect instant progress in reducing health inequalities. But the benefits of Social Security privatization, if any, won't materialize for many decades. By using blacks' low life expectancy as an argument for privatization, Mr. Bush is in effect taking it as a given that 40 or 50 years from now, large numbers of African-Americans will still be dying before their time.

Is this an example of what Mr. Bush famously called "the soft bigotry of low expectations?" Maybe not: it isn't particularly soft to treat premature black deaths not as a tragedy we must end but as just another way to push your ideological agenda. But bigotry - yes, that sounds like the right word.


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