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Pension Puzzles

Pension Puzzles: Social Security and the Great Debate

Melissa Hardy
Lawrence Hazelrigg
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  • Book Info
    Pension Puzzles
    Book Description:

    The rancorous debate over the future of Social Security reached a fever pitch in 2005 when President Bush unsuccessfully proposed a plan for private retirement accounts. Although efforts to reform Social Security seem to have reached an impasse, the long-term problem—the projected Social Security deficit—remains. In Pension Puzzles, sociologists Melissa Hardy and Lawrence Hazelrigg explain for a general audience the fiscal challenges facing Social Security and explore the larger political context of the Social Security debate. Pension Puzzles cuts through the sloganeering of politicians in both parties, presenting Social Security’s technical problems evenhandedly and showing how the Social Security debate is one piece of a larger political struggle. Hardy and Hazelrigg strip away the ideological baggage to explicate the basic terms and concepts needed to understand the predicament of Social Security. They compare the cases for privatizing Social Security and for preserving the program in its current form with adjustments to taxes and benefits, and they examine the different economic projections assumed by proponents of each approach. In pursuit of its privatization agenda, Hardy and Hazelrigg argue, the Bush administration has misled the public on an issue that was already widely misunderstood. The authors show how privatization proponents have relied on dubious assumptions about future rates of return to stock market investments and about the average citizen’s ability to make informed investment decisions. In addition, the administration has painted the real but manageable shortfalls in Social Security revenue as a fiscal crisis. Projections of Social Security revenues and benefits by the Social Security Administration have treated revenues as fixed, when in fact they are determined by choices made by Congress. Ultimately, as Hardy and Hazelrigg point out, the clash over Social Security is about more than technical fiscal issues: it is part of the larger culture wars and the ideological struggle over what kind of social responsibilities and rights American citizens should have. This rancorous partisan wrangling, the alarmist talk about a “crisis” in Social Security, and the outright deception employed in this debate have all undermined the trust between citizens and government that is needed to restore the solvency of Social Security for future generations of retirees. Drawing together economic analyses, public opinion data, and historical narratives, Pension Puzzles is a lucid and engaging guide to the major proposals for Social Security reform. It is also an insightful exploration of what that debate reveals about American political culture in the twenty-first century.

    eISBN: 978-1-61044-272-5
    Subjects: Economics, Political Science, Sociology

Table of Contents

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  1. Front Matter
    (pp. i-x)
  2. Table of Contents
    (pp. xi-xii)
  3. About the Authors
    (pp. xiii-xiv)
  4. Preface
    (pp. xv-xvi)
  5. Chapter 1 Introduction
    (pp. 1-16)

    Is any American adult still unaware of the crisis of Social Security—or, more generally, as the title of an article inForbes Magazinedeclared, “the end of pensions” (Dan Ackman, “The End of Pensions,”, May 11, 2005)? Certainly most adults who do not yet receive Social Security or private pension benefits hope to live long enough to need retirement income, and those who do surely expect those benefits to continue at current levels (and in some cases, Social Security among them, at inflation-adjusted levels). Add to those expectations the enormous clamor in recent years over the bankruptcy of...

  6. Chapter 2 Words, Concepts, and Principles in Contention
    (pp. 17-42)

    Even though as children we rehearse the sticks and stones mantra, we soon learn that words can be weapons. Propaganda is the weaponry in any war of words and, because words are the currency of all argument, the distinction between a difference of opinion and a distortion of fact is a particularly important boundary to recognize. This is especially true of technical terms, which can be used in deliberately confusing or misleading ways, but also of everyday language. Rhetoric, the discipline of using words to persuade, is not a new discipline. One of the “seven liberal arts” of the medieval...

  7. Chapter 3 Trust and Trust Funds
    (pp. 43-64)

    The termtrustfigures prominently in the discussions about Social Security as a central element of both its short-term and its long-term sustainability. On the one hand, trust is a principle that provides legitimacy to the operations of the federal government. It is the confidence we place in the social contract that requires us to pay taxes today so that we can collect benefits when we retire. It also buttresses our acceptance of the complex interdependencies inherent in the division of labor (and division of responsibilities) that characterize our society. The Social Security program was built on trust, and as...

  8. Chapter 4 Preservation or Privatization
    (pp. 65-115)

    Both sides agree that changes need to be made. Exactly what must be changed and how quickly the change needs to be implemented are immediate points of disagreement. But these choices have taken a backseat to the question of when we should decide. Timing the changes in the program, per se, has become secondary to skirmishes around timing the decisions about the changes. The changes are sensitive to the demographic and economic concerns we discussed in previous chapters, and making decisions about exactly what to change is only part of the answer. We also need to figure out when and...

  9. Chapter 5 Markets and Social Insurance
    (pp. 116-142)

    If we hold the distortions, misstatements, and other political maneuverings to the side of the contemporary discussions, what is left of the Social Security debate? One large part consists of a set of comparisons between two organizational models, two ways of trying to maintain some rationality of organization of processes of exchange and distribution. Resources and risks are always distributed and exchanged among members of society in some fashion, whether by design or happenstance. In the Social Security question, the resources and risks of principal interest have to do with providing retirement income. The relevant distributions and exchanges unfold over...

  10. Chapter 6 Politics and Pensions
    (pp. 143-179)

    Rather than acknowledge the connections among the social, political, and economic-technical aspects of the debate over Social Security, and postemployment income insurance more generally, discussions have too often been divided between two sorts of issues. First, we consider the economic-technical matters of financing and fiscal integrity. Separately, we address matters of political-persuasion, of generating popular support for different proposals as well as governmental policies concerning income inequality and insurance. This practice is a common analytic approach to problems, and our own chapters reflect it. It is important to bear in mind, however, that the debate is political-economic, not just one...

  11. Chapter 7 Changing Actors for Changing Times
    (pp. 180-213)

    We began chapter 1 by pointing to the obvious, that the fiscal problem facing Social Security—and it is a very real problem—can be fixed by either or a combination of two adjustments. The outflow of benefit expenditures can be reduced, the inflow of revenues can be increased, or some combination of the two can be devised. Any path we choose involves a few admittedly difficult choices. Achieving any sense of balance between benefit cuts and revenue growth will necessarily entail some negotiated settlements across cohorts—those already born and those yet to be born. In part, these negotiations...

  12. Chapter 8 Questions of Principal and Principle
    (pp. 214-232)

    In spite of the many important program features involved in this debate, much of the analysis and discussion of alternative approaches to postemployment income security has focused on comparative rates of return on investment, often with some sort of standard of fairness of distribution implied if not explicitly included. The comparisons are not always evenhanded; in fact, some of these discussions reflect deliberate dishonesty more than a straightforward difference of opinion. For example, sometimes arithmetic means are used when geometric means (which tend to have smaller values) would be more appropriate. On occasion, differences in transaction costs are understated or...

  13. Notes
    (pp. 233-256)
  14. References
    (pp. 257-268)
  15. Index
    (pp. 269-288)