Magazine article The New American

FDR & Social Insecurity

Magazine article The New American

FDR & Social Insecurity

Article excerpt

ITEM: The Washington Post for January 16 compared Franklin Roosevelt's "New Deal" and George Bush's "Ownership Society" and said about changing Social Security funding: "This shift--from the New Deal to the Ownership Society--is a sea change in the way Americans view the relationship between themselves and the government, and between themselves and the rest of society. Whereas government, unions and other collective organizations were widely seen in the 1930s as placing a safety net under workers and their families, today they are regarded by many people, especially in the 'red states,' as stifling enterprise and protecting the lazy."

Continued the Post: "In contrast to the New Deal, the Ownership Society will have optional elements, with greater rewards but also far greater risk. While the administration's Social Security plan taps into taxes that workers are already paying, a key element of the Ownership Society is that to take full advantage of it, you must put up a great deal more of your own money--pay to play, if you will."

CORRECTION: To say that allowing workers to invest a bit of their own money is riskier than letting politicians redistribute it is insulting as well as inaccurate.

Examine what the stock market has done in the long run. The market has averaged, since 1926, about a 10 percent return. Obviously, that does not happen each year. Yet, as noted by Burton Malkiel, author of A Random Walk Down Wall Street, "For all 25- and 35-year investment periods from 1926 to 2004, investors have always earned positive rates of return. That was true even of investors who put their money in the market at the 1929 peak, just before the Great Depression. The worst return for a 25-year investor starting in 1929 was about 6%. For a 35-year investor, it was about 8%. Long-term investors can invest in the stock market with considerable confidence that they can earn a rate of return far above the 1% or 2% return afforded by the Social Security system. …

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