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Social Security Lessons    (They still search for ways to privatize)


Of all the efforts made by George W. Bush to impose his version of crony capitalism, none was dearer to the hearts of economic conservatives than privatization of the Social Security system.

This was, after all, proposed in 1962 by free market godfather Milton Friedman.

What could be more satisfying for a conservative than to destroy the signature creation of the president who gave us the American "welfare state," Franklin Roosevelt?

Mr. Bush and many other advocates pointed to Chile's privatized system, imposed by the rightist dictator Augusto Pinochet, who, years before Mr. Bush promoted an "ownership society," wanted Chile to become "a nation of proprietors."

Now, however, as reported in The New York Times, "Responding to growing complaints that the privatized pension system is failing to deliver adequate benefits, the Chilean government has recommended that it be supplanted by a system in which the state would play a much larger role."

In describing government under Gen. Pinochet, Mr. Friedman once used the phrase "the Miracle of Chile." As it turns out, the miracle is that good sense is returning before too many of Chile's citizens have been victimized.

Larry Rohter reported last week in the Times:

As things now stand, about half of the Chilean labor force will not qualify for a pension or will receive only a minimum payment, for a variety of reasons that include not having paid into the system for the minimum 20 years.

Commissions to the pension fund industry, according to some studies, have run as high as one third of workers' total contributions, and yield the funds a return on assets of as much as 50 percent annually.

Advocates of the current system consider the Chilean government's proposed new minimum pension, about $143 a month, too generous, because it would amount to what one conservative economist called "a disincentive to contribute" to private accounts.

All of which illustrates the risks of privatizing social insurance.

Both Mr. Bush and Democrats are holding out hope that divided government could produce a bipartisan solution to Social Security's problems.

Americans should hope so -- and that Mr. Bush learned something when his 2005, 60-cities-in-60-days crusade for private accounts utterly failed to convince the country.

He, Ronald Reagan, Mr. Friedman and Gen. Pinochet may have believed that government is the problem, but when it comes to Social Security, the American people don't.

The system must be strengthened, but not simply handed to Wall Street.



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