Slowly, very slowly, I am going through a file box with articles that I clipped from ten years ago. As the debate renews – or continues – about the privatization of Social Security, we can learn from the past.
In 1998, there was a loud call for the privatization of Social Security, whose return on the contributions we make is about 3%. In 1998 the stock market was continuing its historic rise due to increases in productivity, output, and employment. The dot com and financing boom of the “New Economy” was growing in strength and returns in the stock market were above 17% per year. Comparing that 17% return to the paltry 3% return on Social Security contributions – well, there was no comparison.
Twelve years and a “lost decade” of stock market returns later, the safe 3% return on SS contributions doesn’t look as bad as it did in the heyday of the late nineties. In 1998, Dean Baker wrote an Atlantic Monthly article examining the myths about Social Security and the arguments for privatization. The article is online and it’s worth a revisit.