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When financiers who usually have difficulty seeing past the next quarter's earnings release start worrying about your long-term future, only those who believe in Santa Claus think that they have the public welfare at heart. Piņera's backers, from State Street Bank to Salomon Bros. and Prudential, are not people who you normally see scouring the streets with alms for the indigent. To overcome public skepticism, they resort to scare tactics, incessantly talking about the impending collapse of the Social Security system.

But the privatizers' predictions about Social Security's "bankruptcy" presume zero population growth and sluggish economic growth. They then compare the results with the rosiest estimates of stock-market growth, based on recent boom years, and assume this will continue indefinitely. To the extent there are concerns about Social Security's long-term viability, there are some simple fixes, like lifting the present $72,000 earnings cap on contributions, so that some of the fastest growing and most inflated incomes pay a bigger share. Funny how the doomsday reformers never mention that fact, even though that's the reform that voters back in opinion polls.

In pursuit of sending shivers down the spines of aging baby boomers, they home in on FDR's white lie. They draw a distinction between Social Security, which they choose to describe as a "pay-as-you-go system," and "fully funded" privatized pension portfolios with -- for example -- State Street. And they say, with some accuracy, that the Social Security system depends on people working now paying the pensions of current retirees. Your payroll taxes are paying the pensions of your parents and grandparents.

But in real terms, the difference between the existing system and a privatized one is negligible on that score. By the time you come to retire, it will be the hard work of your offspring making corporate dividends or paying taxes to fund the interest on T-bonds, that will keep you tripping the light fantastic on your Teflon hip joints. In neither case do you get some mythical stash of gold.

So Piņera's prescription ignores reality: If you want a fully funded pension, then you need to go survivalist and make for the hills with a few container loads of your favorite hooch and canned goods. If you stay part of society, then you will share its economic vicissitudes -- including, if you have a private pension portfolio, a growling bear market, a slump or a depression.
salon.com | July 20, 1999

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