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No Mandate for Market Fundamentalism

by Fred Block
The President insists that his election victory paves the way for major new initiatives such as Social Security privatization. However, there is little evidence that the public embraces the right wing's long term hostility to our most successful and effective social program.

President Bush has claimed that the election provides a mandate for his regressive economic policies, but the evidence does not support this. Many who voted for him did so despite the President’s embrace of market fundamentalism — the extreme view that insists that markets should be left to regulate themselves. Most striking are the votes in Florida and Nevada to increase the statewide minimum wage. The measure passed in Florida with 71% of the vote and in Nevada with 68%. Even if one assumes that all Kerry voters favored this measure, at least 1 in 3 Bush voters agreed that government should assure that low wage workers get a raise.

These measures were put on the ballot precisely because the President’s Republican allies in the Congress have steadfastly blocked any effort to raise the Federal minimum wage since it was increased to $5.15 per hour in 1997. The market fundamentalists insist that the minimum wage should not be increased because markets always get prices right and government efforts to override market prices will inevitably destroy jobs. Precisely the same arguments were repeated by opponents of the initiatives in both Florida and Nevada. And in both states, overwhelming majorities rejected these misleading arguments. Supermajorities seem to understand that the labor market is shaped by rules and regulations and that society has a moral obligation to protect low wage workers from the superior bargaining power of giant corporations.

These votes are particularly relevant for the President’s stated intention to reshape Social Security. Market Fundamentalists have always opposed Social Security for reasons that have nothing to do with the system’s finances. Milton Friedman, the high priest of market fundamentalism argued in the New York Times (January 11, 1999) that social security should be replaced with a private and entirely voluntary system of retirement savings. Friedman and friends see Social Security as a wedge for an expanded government role in society. They saw a logical progression from Social Security, a system that protects the elderly from poverty, to Medicare, a system that is intended to protect the elderly from health care costs. And they worry that this logic will lead inevitably to government providing universal health insurance, as governments do in all other developed societies. Since that progression is their ultimate nightmare, they figure they can prevent by moving backwards. They want to dismantle Social Security and Medicare and return to a society in which the government does not protect anyone from either poverty or illness.

But Social Security has been one of the most successful government programs in U.S. history. Without it, as many as 33% of all of the elderly would live in poverty , and it has freed successive generations of middle aged people from the financial burden of supporting their elderly relatives. Most importantly, the program has allowed tens of millions of low wage workers — who were unable to acquire other retirement assets — to live out their lives with dignity. The success and popularity of the program makes it impossible for market fundamentalists to attack it frontally. They have chosen instead to use the classic technique of the Trojan Horse; their plan is to offer the voters a glittery gift that will later turn deadly.

The plan is to provide working people with the gift of “private retirement accounts” to which they can divert some of the funds that would otherwise go directly into the Social Security system. The Administration is assuming that people will obey the proverb and not look the gift horse in the mouth. But if they do look more closely, they will see that the plan doesn’t add up.

Future recipients will have a smaller guaranteed retirement benefit and will be at greater risk of outliving their income. The historic protection that Social Security has provided for disabled workers and for survivors of covered workers will be diminished. Most importantly, the money that is diverted into private accounts will not be available to pay the obligations of the Social Security system, creating a $1 to 2 trillion dollar “transition gap”. In the short term, the government is likely to expand its already huge borrowing to cover this gap, but over time, the Social Security System’s dependence on borrowing will make it more unstable. The public system will become progressively more fragile, and then the market fundamentalists will move in for the kill and argue for dismantling the system altogether. One can already hear them: "why even bother with a poorly financed public system when people already have their private accounts?"

This is where the Florida and Nevada voters come in. Those who understand that society has a moral obligation to protect and support low wage workers should also understand that we have a parallel responsibility to the elderly. Market fundamentalists believe that all those who haven’t saved enough for a secure retirement should be sentenced to an old age of anxiety and deprivation, but this belief violates our fundamental values. Mr. President, you have no mandate to undermine our Social Security.

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