Getting Personal over Personal Accounts

Getting Personal over Personal Accounts:
Business Week attacks the ownership society with scare tactics and liberal talking points.

By Charles Simpson [1]
May 13, 2005

     To discredit the presidents vision of an ownership society, Business Weeks Lee Walczak and Richard S. Dunham spread economic doom and gloom and painted an inaccurate picture of the political landscape of Social Security reform. They warned of rampant job insecurity, the offloading of personal responsibility onto individuals, the excesses of capitalism, and even took gratuitous shots at the president. Their May 16, 2005 piece, I Want My Safety Net, relied heavily on liberal think tanks and talking points to eschew economic reality.

     Here are some of the more obvious problems with the piece:

An Extreme Example: To explain why so many Americans arent buying into Bushs Ownership Society, the feature story started with a Philadelphia waiter who had a brush with President Bushs Ownership Society. A poster child against personal accounts, George Silli, saw the value of his mutual funds drop by 60%. The article called him a political independent, but he advocated for universal, government-mandated, heath insurance: a decidedly liberal position. Like many seniors who will be exempt from Social Security reform (and the AARP), he stridently opposed personal accounts.

Polling for Bias: A poll from the Civil Society Institute, a left-wing think tank outside Boston, was used to justify the articles unsubstantiated rationalizations behind the publics demand for failing government programs like Social Security and universal health care. CSI has criticized the president for his global warming policy and position on stem cell research. The authors also relied on data from the left-leaning Pew Research Center to make the case that at the core of Safety Net Nation are white men comprising the presidents electorate. Walczak and Dunham claimed that roughly 40% of Bushs votes came from Safety Net voters who have soured on Wall Street and dislike the Presidents approach to Social Security.

Talking Down the Economy: Walczak and Dunham labeled two straight years of positive job growth (more than three million new jobs) with unemployment at 5.2 percent an era of rampant job insecurity. Despite the admitted recovery from the tech bubble, they described the ownership society as a dire place. They wrote, As income volatility has grown, government prodded by free market Republicans out to reverse the New Deal- has been offloading ever more responsibility onto individuals. Walczak and Dunham were unclear about what responsibility has been unloaded onto individuals by government and didnt cite any examples. Outside of highly successful welfare reforms, Congress hasnt curtailed any spending on entitlements or rolled back any program for sake of a free market solution.

Social Insecurity over Individual Ownership: They continued, While federal spending on the safety net for the poor has grown briskly, it hasnt kept pace with societys needs. Why? Because, Medicare is straining to cover seniors bills, and some states are downsizing Medicaid programs. Walczak and Dunham ignored the reasons behind Medicare and Medicaids problems, since they undermined their own argument about the primacy of the safety net over individual responsibility. These entitlement programs are inefficient and too expensive. According to the National Center for Policy Analysis, by 2020, 25 percent of all federal income taxes will pay for Medicare; that figure will increase to 50 percent of federal income taxes by 2040.

Poisoning the Well: Walczak and Dunham held up President Bush as a hypocritical advocate of the ownership society, claiming his connections invalidated his experience. But as the scion of an aristocratic Eastern dynasty, the budding young tycoon always had a network of family friends and relations to call on. Those golden connections bailed George W. out of his early forays into the oil business. They implied that the president wouldnt know the first thing about the pitfalls of the ownership society. After all, not everyone has the luxury of a golden parachute to protect them from what Walczak and Dunham in one passage called the excesses of capitalism.

Wary of Wall Street: According to BusinessWeek, riskaphobia has taken hold of the Social Security debate. Walczak and Dunham tied the failure of government entitlements like TennCare, Tennessees defunct universal healthcare program, to the reason so many people are wary of investment risk. Because of welfare reform and the out-of-control costs of government entitlement programs, investors were more likely to perceive investment as risky. A political scientist at UC-Santa Cruz, Eva Bertram, piled on by claiming the public is leery of becoming more dependent on the market. According to the Business & Media Institute study, Biased Accounts, exaggerating the risk of the stock market is a common problem in the media.

     The reality is that, for pensioners in Chile, the ownership society has been incredibly lucrative. In a December 1, 2004 op-ed for the New York Times, Jose Pinera, Chiles former secretary of labor and social security, wrote that, When the system was inaugurated, one-fourth of the eligible work force signed up in the first month. Today 95 percent of covered workers participate. For Chileans, their retirement accounts represent real property rights.

     Pinera explained that since the system started on May 1, 1981, the average real return on the personal accounts has been 10 percent a year. The pension funds have now accumulated resources equivalent to 70 percent of gross domestic product, a pool of savings that has helped finance economic growth.

     Walczak and Dunham said nothing about this amazing success in Chile and how it could be realized in the United States. Instead of facts and figures, the duo peddled skepticism and condescension towards Americans and the free market system. Still, they offered one groundbreaking solution from those thinking on a larger scale. Yale political scientist Jacob Hacker and Peter Orszag at the Brookings Institution had a revolutionary idea: a universal family savings account which would be regulated by the government and administered by the private sector. Unfortunately, Hacker and Orszag dont get to the bank often. Anyone can obtain such a savings account at their local bank or credit union.

     According to the Business & Media Institute study, Biased Accounts [2], this sort of political bias and economic ignorance is rampant in the network media. Instead of accurate and balanced reporting on economic issues, the media gives short shrift to the presidents plans for Social Security. However, Walczak and Dunham take their bias a step further to craft a serrated seven-page hit piece. BusinessWeeks readers deserve better.