Friday, June 10, 2005

Cinderella Man, The Great Depression, and
Social Security

On Monday I took Feri to see Cinderella Man. She was more interested in seeing it than I, though I was curious enough about it. I've had an aversion to boxing movies as I've gotten older, mostly because of the up close, methodical, and animalistic brutality that comes with watching a fight. There's something very atavistic at work when we take pleasure and are willing to pay to watch two men attempt to destroy each other in such close proximity. I can make my way through a boxing movie mostly by telling myself that this is just a movie and I'm not really watching a fight, but even then I can't escape the thought that we're a savage bunch when we put men through this for money and our pleasure.

The movie wasn't a bad one at all, and Russell Crowe isn't a bad actor when he's not throwing telephones at concierges, and I very much enjoyed watching Paul Giamatti, of American Splendor (a superb movie about dysfunctional people and what they're capable of) and Sideways (not a bad movie, but I never got why there was so much "buzz" about it) do his thing as Joe Gould. The story, which is based on a true-to-life character by the name of James Braddock, portrays a man who in just about every sense would be considered a hero. He raised above the odds against him, and became an inspiration to many people for overcoming adversity, and in that his story is very inspiring. On the whole, though, with this movie we're talking about Rocky set during the Great Depression so the story isn't all that original, and I suspect Braddock never had a city construct a statue in his honor the way Philadelphia did for Stallone's Rocky character, so it does cause one to wonder about our love for myth over reality.

Ron Howard does a pretty good job of focusing on the Depression and what it did to people, and in a way this is a story that merits its own movie . Most people that are alive today have no connection to the Depression, whereas I grew up with grandparents who had lived through those years and had heard all the stories about not trusting banks, people putting their money in their mattresses, learning to eat parts of an animal we wouldn't touch today (kidney, brains, liver, tripe --- cow stomach, pigs' tails, ears, and feet --- gag!) because they were cheaper, and God forbid putting money into stocks given what the Great Depression did to so many people. To convey some general sense of what the Depression did to the country, at its height 30% of the population was out of work. The chart above averages out unemployment over the course of a year's time so you don't get to see the unemployment spikes --- imagine that, 30% of a country unemployed, just about 1 in 3 working Americans were unable to find jobs.

There were a multitude of factors which brought us into the Depression: Globalization and the resulting trade embargoes that arose in response to it; the introduction of liberal credit to everyone, and the unbridled enthusiasm with which people took advantage of this new tool to make purchases with which to keep up with the Jones and Smiths; an unregulated stock market which issued shaky stocks, and with the option to use credit to buy for people who were convinced that the stock market was a sure thing money machine; a banking system which was uninsured and unrestricted in where it could make investments, to wit: the stock market; and the eventual stock market crash of October '29 served as the nexus for bringing everything together into a depression of not just national, but global proportions. When you watch Cinderella Man you truly do get some sense of what it was like in those days, and you can appreciate why people flirted with communism and socialism, something which was forgotten, on purpose I'm sure, by people in the fifties like Eugene McCarthy and Roy Cohn who made a career out of witch hunts against good people who were at their wit's end during a period of economic devastation in this country. Franklin D. Roosevelt came to office as president in 1933, and from then up to the Second World War (which is when the Depression was finally beat back --- in a very real sense many dead bodies went into overcoming the Depression) did what he could to fix what put so many out of work, though he never quite made it to halving the annual maximum. One of the safeties that Roosevelt was responsible for was Social Security, the intention of which was to make sure our elderly were never without something to live on so long as this country remained in existence. Later on the program took on a greater range of coverage, but the original intention was to protect retirees who were otherwise without pensions or had small fixed incomes.

What got me thinking about all of this, but again, was an article in U.S. News & World Report by Michael Barone, Future Shock, with the catch line from the article displayed by the magazine's
presentation folks being "The lesson is that experts can err and big organizations can't always be relied on." He then goes on to inform us that the Supreme Court has decreed that social security benefits are NOT a right --- whoooooa, you say, receiving something I paid into is not a right? Well, as I expected, Barone's use of a Supreme Court case to support this point is somewhat misleading. Flemming v. Nestor , the case he cites, boils down to the following:

Ephram Nestor was a Bulgarian immigrant who came to the United States in 1918 and paid Social Security taxes from 1936, the year the system began operating, until he retired in 1955. A year after he retired, Nestor was deported for having been a member of the Communist Party in the 1930s. In 1954 Congress had passed a law saying that any person deported from the United States should lose his Social Security benefits. Accordingly, Nestor's $55.60 per month Social Security checks were stopped. Nestor sued, claiming that because he had paid Social Security taxes, he had a right to Social Security benefits. [Courtesy of the Cato Institute which would also like to remind you that Social Security benefits are not a right, and you shouldn't count on them.]

Ultimately how fair this was to Nestor is in my mind questionable, but Congress said if you're deported you're not entitled to social security, i.e. you may have a right to claiming it in another context but if we kick you out of the country collecting it isn't in fact a God or governmentally given right. You can be sure that if the American people had it in their heads that this wasn't a right, i.e. you put money into something and remain an upright citizen that you should get something in return, that the law would be changed to reflect that it is a right after the citizenry raked their representatives over glass somewhere.

Barone then points out how we've moved from defined benefits retirement accounts (such as the ones currently being defaulted on by United, US Air, and others), with retirement instruments like 401K's and IRAs taking their places, and in keeping with this we should also be moving social security to privatized accounts, mostly because it allows the poor to accumulate wealth. I love it when a rich or otherwise well-off guy makes this argument as he often, as in this case, is pulling your leg. The wealth you "accumulate" isn't yours to do anything with in privatized accounts, or at least anything besides determining where you invest it (which would include T-Bills under Bush's current plan, which is exactly what they're invested in now). You can bequeath what's left of your amassed social security wealth (which, remember, you accumulated while you were one of the working poor, and assuming your investments actually increased in value over the time of your investing, AND that when you take your money out of those investments and put them into something less volatile that what you earned indeed reflects an increase in your investment --- lots of caveats there, don't you think?) to your heirs --- Whooop-Tee-Do! For poor folks accumulated wealth only means something when they're dead --- something tells me that wealth with that type of restriction on it is not what Barone normally is thinking about when he uses the word, but it should be ok for poor people - righto!

Social security is indeed heading into fiscal problems, in about thirty years, but hey, they're coming. And we SHOULD do something about heading those problems off. The problem is that Republicans like Barone, who won't be counting on social security for much more than making a payment on their lawn maintenance contract when they're in retirement, are averse to all of us paying something now to take care of the problem that will arise later. There are many
relatively painless options we could avail ourselves of now to help pay off the pending problem --- a simple and easy one, raise gas prices $.01 per gallon so grandma, you, and your kids have something coming into the coffers in 2050, and maybe that extra penny will help people think more about conservation (ok, that's a stretch.) But Republicans don't want you to feel fiscal pain, and hell, really how many of us want to deal with it? But putting the burden of a guaranteed benefit (remember, per Barone and the Cato Institute, it's NOT guaranteed, particularly if you're a communist kicked out of the country) onto the shoulders of poor people, who are then expected to figure out what to invest in during their work lives and then when they retire (you don't just get handed that money when you retire under the private account plan, no, you have to invest it in an annuity, another wonderful blemish and complication to this plan to save social security --- but all this investing does sound like a good deal for people in the investing job arena, who, oh by the way, tend to be Republicans, doesn't it? God, I must get my cynicism in check), vice having all of us take up the load now to fortify the system so it serves the purpose that most working Americans, who don't consider themselves wealthy or particularly expect to make it into those rarified levels of fiscal categorization, expect for it to. And please, please let's stop the horse manure about empowering the poor by helping them to acquire wealth --- Barone and company should be ashamed of themselves.

Yes, experts and big organizations can't be relied upon, but the U.S. government is not just any big organization, it's answerable to the American people who understand the notion of fair especially when it comes to what they'll take from the government, and social security entitlement is not determined by a case specific to a deported communist. Making the average citizen the expert for their retirement payments isn't the answer, nor is subjecting their retirement fund to the inevitable risks of the ups and downs of the stock market, as I would have thought Barone would appreciate inasmuch as he makes the point that the organizations behind the market can't be relied upon. Collectively doing what we need to to make sure that social security maintains a fair semblance of what it's been for the past forty or so years into the foreseeable future is a worthwhile national endeavor, one that we should all be willing to pay a little to make happen - though I guess not if you're a republican or liberterian.

2 Comments:

Blogger BotanicalGirl said...

Good article. As a twenty-something, I watch part of my paycheck go toward Social Security every month and honestly wonder if I'm ever going to see it again.

Luckily I'm smart enough that I think I can navigate retirement funds and investing and get a decent nest egg together before I retire, but not everyone has the time or the money or the smarts to do that.

1:33 PM  
Blogger James said...

I think if we take action NOW, or in the very near future, you can see your money coming back to you from social security --- there's no good reason why it shouldn't if we were simply willing to make more of a sacrifice, and it's not a substantial sacrifice, now. I have to run again something I put together a long time ago that talks to this.

Those like you I don't worry about, one way or another you'll do fine. I'm not worried about me and my wife, we'll do fine. But to be honest I think we're more in the minority than in the majority and I think this country, in addition to offering healthcare for everyone, should also be able provide a gauranteed income stream to all of its citizens in retirement --- we'd pay into it surely, but something should be there for all of us.

6:21 PM  

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