-

February 23, 2005

LA Times Misleading Article on Private Accounts

Tuesday, the LA Times ran a 45-paragraph front-page opinion piece article on state worker's rejection of "private account" options in their government retirement plans.

President Bush believes Americans are so eager to join the "ownership society" that, given a chance, two-thirds of those eligible would divert funds from Social Security into the personal investment accounts he proposes.

But when public employees in seven states were offered the opportunity for similar accounts during the last decade, nowhere near two-thirds signed up for them. In many instances, the figure was closer to 5%.
The article goes on a great length to describe how unpopular "private account" plans are among state workers, with the implication being that no one in their right minds would give up Social Security for the chimera of private stock plans.

Two minor points that are never mentioned in the article:
  • Most state pension plans are so generous that no sane person would choose anything else. In LA County, for example, long-term county workers can retire at age 60 with a monthly pension that exceeds their last month's pay.

  • Many state and local workers also opt out of Social Security.
It's actually not hard to dislike Bush's announced plan. Why the Times feels it is necessary to offer such disingenuous arguments is a mystery, since the plain truth would serve them better.

UPDATE: A shorter version of this post may run ran Friday in the LA Times letters section.

Posted by Kevin Murphy at February 23, 2005 09:12 AM | TrackBack
Comments

"Many state and local workers also opt out of Social Security."

the link does not support your claim. Can you give me a source for your claim? The link actaully showed an INCREASE in the number of state workers covered.
"When it began, the Social Security program did not include any of these employees. Over the years, the law has changed. Most employees have Social Security protection because their states and the Social Security Administration entered into special agreements called “Section 218 agreements.” Others were covered by a federal law passed in July 1991 when Social Security was extended to state and local employees who were not covered by an agreement and were not members of their agency’s public pension system."

Posted by: Tom Murphy at February 26, 2005 10:47 PM

Actually, before the reform of the Dole Commission, NO federal, state or local workers were required to be part of SS. After the changes, new federal hires were added to SS. But state and local workers were only covered IF they didn't have a state or local retirement plan.

This may seem like an increase in local/state worker covereage, but it is actually a null set, or damn close. By simply stating so in their collective bargaining agreement, any state/local gov bargaining unit can opt out. I am not aware of any that do not. Feel free to try. LA County workers, for example, pay no social security tax. It is my understanding thal all California workers covered under CalPERS are also exempt. The SS web page linked quite clearly states how trivial it is to opt out.

Posted by: Kevin Murphy at February 27, 2005 12:09 AM

The article was making the point that people were not jumping to put their money personal investment accounts. How is anything that you are arguing contrary to this point? I skimmed over CalPERS and it sure doesn't look like personal investment accounts, it looks like social security accounts. So what is your point?

Posted by: Tom Murphy at February 27, 2005 01:22 PM

Sorry, man, you obviously want to misunderstand.

Posted by: Kevin Murphy at February 27, 2005 09:42 PM

Kevin, you really are unreasonable. The article said, "The accounts Bush is proposing are not a precise match to the ones states have offered in recent years. And the low signup rate for accounts among state workers may be partly because more of them are covered by generous pensions than are American workers generally, so they may feel less need for the accounts. But the tepid response to accounts in some places casts doubt on one of the central premises of the Bush plan: that Americans are clamoring to join the investor class."
Why was your letter necessary? Also, are you serious with using the term "bashing" and Social Security "reform"?

Posted by: Tom Murphy at February 28, 2005 12:49 AM

Look, you asked me for evidence that local workers opt out of social security. Go back and read your first post.

I answered that, and you then pretend that your question was about something else.

As for the article: the print article had no such sentence. I looked real hard. In any event, they did not discuss the extremety of the differences (e.g. pension schemes of 110% of final pay, vs SS's typical 35% -- 22% or less for folks at the 90K tax cutoff), even in this revision. And there was utterly no mention of the fact that state workers are mostly exempt.

An equaly fair article would have been: "State and local workers have rejected social security since inception, preferring union-run plans. This shows that there has always been great demand for private control over retirement, possibly helping Bush's reform." Unfair and misleading? Of course. As was the Time's article.

Posted by: Kevin Murphy at February 28, 2005 08:26 AM