The re­al­i­ties Democrats must live in de­nial of

The Washington Times Weekly - - Commentary -

Taway. o be a Demo­crat means to live in de­nial. Con­sider all of the things you must ig­nore or ex­plain

Not the chau­vin­ist pigs whose trans­gres­sions pre­oc­cu­pied 1970s fem­i­nists, but PIGS as in Por­tu­gal, Ire­land, Greece and Spain, na­tions fac­ing sov­er­eign debt crises be­cause they pur­sued ex­actly the sort of poli­cies Democrats fa­vor for this coun­try. The PIGS share bloated gov­ern­ment sec­tors (In Greece, the gov­ern­ment em­ploys 33 per­cent of work­ers.), gen­er­ous un­em­ploy­ment pack­ages, high min­i­mum wages, dire pen­sion obli­ga­tions and a shrink­ing tax base. Each week brings fresh news of tur­moil in the streets.

Here is a June ac­count from CBS News that Democrats will want to ig­nore: “To see a coun­try truly on the brink of fi­nan­cial ruin, look no fur­ther than Greece. On Wed­nes­day, its par­lia­ment cut pub­lic ser­vices and raised taxes to fend off bank­ruptcy and prob­a­bly spare the world an­other mass eco­nomic


melt­down, at least for now. . . . As par­lia­ment did what it could po­lit­i­cally, pro­test­ers turned Athens into a war zone.”

The protests are un­der­stand­able (if not ex­cus­able). When debt-rid­den states face bank­ruptcy, it is al­ways at a time of eco­nomic dis­tress. In good times, af­ter all, tax re­ceipts in­crease. So just when jobs are scarce and times are dif­fi­cult, just when a greater than usual num­ber of peo­ple are col­lect­ing un­em­ploy­ment and other ben­e­fits, the gov­ern­ment is forced to im­pose aus­ter­ity.

Would it have been bet­ter to have made smaller re­duc­tions in ben­e­fits ear­lier? Yes. Would it have been even more de­sir­able not to ac­cus­tom so many cit­i­zens to gov­ern­ment largesse? Don’t ask a Demo­crat.

Also in eco­nomic in­ten­sive care is Por­tu­gal.

Here’s the Los An­ge­les Times ac­count: “An­a­lysts ex­pect that Lis­bon will ul­ti­mately need up to $115 bil­lion in loans and guar­an­tees. The amount would be cov­ered fairly com­fort­ably by the bailout fund cre­ated by the EU last year to ad- dress the widen­ing euro debt cri­sis, but would come with strin­gent con­di­tions that Lis­bon rein in pub­lic spend­ing. Last month, Prime Min­is­ter Jose Socrates failed to win par­lia­men­tary ap­proval for a fourth round of aus­ter­ity mea­sures within a year, which prompted him to re­sign and his So­cial­ist Party-led mi­nor­ity gov­ern­ment to col­lapse.” Democrats will not want to dwell on the fact that the Euro­pean Union will not be bail­ing out the United States. In fact, no one will be avail­able to bail out the U.S.

At the other end of the eco­nomic spec­trum, Democrats must ig­nore Chile’s re­mark­able suc­cess with pri­va­tiz­ing so­cial se­cu­rity.

Thirty years ago, fac­ing a pen­sion over­hang sim­i­lar to our own, Chile adopted a pol­icy that nearly all Democrats re­gard with hor­ror, they pri­va­tized their pen­sion sys­tem. Not all at once. Those who were al­ready re­tired were grand­fa­thered into the ex­ist­ing sys­tem. New work­ers were re­quired to par­tic­i­pate in the pri­vate re­tire­ment ac­count pro­gram. All other work-


ers were of­fered a choice to re­main with the old sys­tem or choose the new one. Nine­tythree per­cent chose pri­vate ac­counts, con­ser­va­tively man­aged.

How has it turned out? Over the course of three decades, de­spite ups and downs in the mar­ket as well as ter­ri­ble earth­quakes, these ac­counts have av­er­aged re­turns 9.23 per­cent above in­fla­tion. So­cial Se­cu­rity, by con­trast, av­er­ages re­turns of about 1 per­cent. In the United States, the el­derly are wards of the state.

Each Chilean, by con­trast, has own­er­ship of his ac­count. He or she can pass any un­used por­tion on to chil­dren and grand­chil­dren.

When New York Times re­porter John Tier­ney worked out his own So­cial Se­cu­rity con­tri­bu­tions on the Chilean model, he found that his pri­va­tized pen­sion would have been $53,000 a year plus a one-time pay­out of $223,000. The same con­tri­bu­tions paid into the Amer­i­can So­cial Se­cu­rity sys­tem would have paid him $18,000 a year.

Chile’s free mar­ket poli­cies have made it one of the wealth­i­est na­tions in the West­ern hemi­sphere, with the high­est nom­i­nal GDP in Latin Amer­ica. Their pen­sion re­form has so far been copied by 30 na­tions.

Per­haps Chile, so far from Wash­ing­ton, D.C., is too easy to ig­nore. But what about Galve­ston, Texas? It seems that 30 years ago, far-sighted lead­ers took ad­van­tage of an opt-out clause (since re­moved) in the So­cial Se­cu­rity law and put county em­ploy­ees into pri­vate pen­sion ac­counts. Galve­ston’s em­ploy­ees take home pen­sions with 7 per­cent an­nual re­turn com­pounded over 30 years com­pared with So­cial Se­cu­rity’s 1 per­cent.

Democrats must, sim­ply must, deny that pri­va­ti­za­tion pro­vides far su­pe­rior out­comes, be­cause the truth is that in­de­pen­dent, self-suf­fi­cient, non­needy cit­i­zens have lit­tle use for a party whose en­tire ra­tio­nale is “Let Me Take of You” by tax­ing some­one else.

Mona Charen is a na­tion­ally syn­di­cated colum­nist.

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