Have you noticed how few senior citizens are eating dog food these days?
Call me an "old softy," but I consider that a good thing, and I give full credit to Social Security and Medicare which have changed the economics of old age to the point that no one under the age of 60 remembers a time when America's elderly poor actually slumped cans of Alpo onto their dinner plates, because they could afford nothing better.
Back in the Clinton era, I spent eight years defending Medicare from attack, initiating the conversation (still ongoing) about drug reimportation from overseas, and trying to derail misguided efforts to privatize Social Security.
I bring this up not to rehash the past but because two things are now front and center in America today: the collapse of Merrill Lynch and the financial markets last week, and the determination of John McCain, in the absence of reality, to embrace Social Security privatization.
What does Social Security have to do with the collapse of Merrill Lynch and the the other financial giants?
Actually, quite a lot.
You see, back in 1996, the folks who were pushing to privatize Social Security were Wall Street firms like Merrill Lynch, Morgan Stanley, and Goldman Sachs.
Brokerage houses were salivating at the prospect of skimming off hundreds of millions of dollars a year in commissions and transaction fees from a privatized system.
All that had to occur for that to happen, was to sing the siren song of greed.
And, of course, the stage was well set. Back in the mid-1990s, everyone from cab drivers to fresh-scrubbed college grads were convinced they were stock-picking geniuses. The market was roaring! Surely any fool could make a mint on Wall Street? It was simply a matter of tossing a dart, and never mind if anyone said differently!
Wall Street knew an opportunity when it saw one, and so it pumped hundreds of millions of dollars into a campaign designed to leverage fear, resentment, and greed into a new profit center for the hyper-rich.
The fear being fanned was the notion that Social Security was "going to go broke." And never mind that it was not true.
The resentment being fanned was the notion that someone, somewhere, might be getting something they did not quite deserve.
The big emotional driver, of course, was greed.
Think about how much money you could be making if you invested in such sure-fire winners as Hewlett-Packard or Pets.com or Tenet Healthcare!
What could go wrong? Nothing! Stocks were soaring!
Of course, to buy the cure you first had to buy the disease.
Social Security was terribly sick said Wall Street.
The cause of the disease, said the stock market sages, was that America was aging.
We were going to go broke because we were growing old.
And so Merrill Lynch and other brokerage firms ran full page ads, such as the one below, talking about the demographic "time bomb" of Social Security.
Click on the ad, above, to read the full text. And click here to read the annotations, numbered in blue, to read how Merrill Lynch was trying to fear-monger us into killing Social Security.
Of course it was all nonsense, but it was potentially lucrative nonsense for Wall Street traders, and so it was asserted, repeated, parroted and echoed across the landscape by folks who overtly or covertly were taking vast sums of money from Wall Street.
Not everyone was on the take, of course. A lot of people were simply ignorant.
The ignorant did not know the benefits of an aging population, nor did they understand the liabilities of a rapidly growing one.
Casual pundits did not know the difference between one kind of dependency ratio and another.
And Wall Street knew that.
They sought to tell a simple story, no matter if it was a lie.
It was enough if it sounded true. Greed, fear and resentment would do the rest.
We were told "Social Security was like the Titanic."
Which was true, except that we were 30 miles from the iceberg, we were sailing on a clear day, and we had an attentive watchman on deck. If we made a quarter of a degree change in course, we would sail so far from the iceberg we would never know it was there.
But Wall Street traders wanted us to panic. They wanted us to sink the boat NOW in order to avoid hitting the iceberg 30, 40 or 60 years into the future.
Now, it's true that if you sink the boat, you will not hit the iceberg. But that's cold comfort when you're treading water, alone, in the North Atlantic.
The good news is that through sheer force of fact, rhetoric and some luck, those of us working to derail Wall Street privatization efforts manged to stall things long enough that the stock market had a major "correction."
Which is a nice way of saying that a few million people who thought they were geniuses, lost their shirts and learned a fundamental mathematical fact: If you lose 50% of your portfolio's assets during a "correction," it takes 100% growth in that same portfolio just to be made whole again.
A small lesson was learned. But it was a small lesson, and not everyone learned it. And, truth be told, we are a nation of amnesiacs. We have rafts of politicians who are slow learners and quick forgetters.
And Wall Street is nothing if not patient.
And behind it all, always just out of sight, remain the discrete men and women with bags of cash who are only too eager to lubricate the wheels of Capitol Hill.
They are people like McCain campaign manager Rick Davis who used to run a front group opposing Fannie May and Freddie Mac regulation, and Charlie Black, a former lobbyist for JP Morgan, Washington Mutual Bank, Freddie Mac, and the Mortgage Bankers Association of America.
And so, because we still have rats in the grain pile, we still have folks staggering up to podiums to talk about Social Security privatization.
We still have Wall Street front groups trotting out fresh-scrubbed young staffers who are paid to ask quivering questions about deregulation and Social Security privatization, as if these topics are front-and-center in the minds of 20-somethings from coast-to-coast.
The answer John McCain gives in the clip, above, is straight from the play book supplied by those running his campaign; people like Merrill Lynch lobbyists Judy Black, Dan Crippen, Vicki Hart, Jim Hyland, Peter Madigan, and Steve Phillips, to name a few.
And so, like the talking parrot that he is, John McCain says it is "outrageous" that young people are paying into Social Security to pay obligations to America's seniors.
Now, to be clear, what John McCain is really saying here is that he has no idea how Social Security actually works.
Social Security has always been a progressive multi-generational transfer program. That is why it has worked so well for so long. Young people have been paying for the old for more than 60 years. That is how the system works. To hear a politician express outrage that this is how the system works is a bit like hearing a mechanic say he is terrified that explosions occur inside a gasoline engine; it is a statement that does not inspire confidence in the repair job being suggested.
As for the notion that demographic change is going to bankrupt this nation, it's pure bunk. And I guess I would know: I am a demographer who has spent a lot of time with the Social Security actuarial and economic-variable tables.
Social Security is sound now, and it will be sound into the future.
But you know what is not sound?
All gone, bankrupted, restructured, or boned out to foreign investors.
These companies wanted to run your life, but in the end they could not run their own.
More than 80 percent of AIG is now owned by the U.S. Government.
Fannie Mae and Freddie Mac are still afloat only because of a $200-billion bailout from U.S. taxpayers.
American Home Mortgage has collapsed.
Countrywide Financial has bellied over, with its assets acquired by others.
Washington Mutual is teetering, while JPMorgan Chase, the Royal Bank of Scotland, Barclays and Lloyds have all had their stock ratings lowered in the last week.
John McCain, of course, is nearly oblivious.
Last week he repeatedly said "the fundamentals are fine," and then when it became clear no one would salute that nonsense, he decided to turn around and claim he and the Republican party has always been about sensible regulation and government oversight.
Now the same people that tried to stampede us into privatizing Social Security are trying to stampede us into socializing their debts and bad investments.
They want us to give them $700 billion or $800 billion or $900 billion to buy a pig in a poke, and no we cannot look inside (there is no time!) since that might let the cat out of the bag.
But just remember this: If you are prepared to drink their Koolaid, you must also be prepared to eat their dog food.
Put away the Lean Cuisine, and open up a can of Alpo and plop it onto a plate.
That has been Wall Street's solution in the past. That was Wall Street's solution in 1929.
And that is what they're offering us today; the left overs bits, cut away and rendered after they take the choicest cuts for themselves.
Welcome to Dog Food Economics! Now eat up!
- Related Post:
** Pogo Economics: To PetSmart and Back