Cain's "Chilean Model"

Cain’s “Chilean Model”

Politics • October 2011 • Views: 1,114

And oh, is she a biuty!

Election ‘12: Herman Cain’s victory in Florida’s straw poll is notable, among other things, for his advocacy of “Chilean Model” Social Security reform in a state filled with retirees. It ought to be a wake-up call to all candidates.

Aside from the insta-analysis about Cain’s victory being a protest vote against Texas Gov. Rick Perry, it’s worth noticing that — in Florida, no less — both Cain and Perry, who finished first and second in the weekend’s GOP straw poll, were the two most outspoken candidates about confronting the U.S. crisis in Social Security.

It completely ends the notion that addressing the issue of unfunded pension liabilities — in Social Security, Medicaid and Medicare — is the third rail of politics.

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Recent Pages by A.M. Mora y Leon:
Will California's Central Valley Bloom Again? 5 Ways To Alienate A Chilean When Global Warming Freezes Over Chile Social Security Reform A Hot Topic In 2012 Campaign Ezra Klein: From Journolist to Liberal Activist

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4 comments

freetoken Sat, Oct 1, 2011 8:35:44pm

The writer of course seems blind to fact that Pinochet was a dictator and the "reform" was done under that rule. There's not a right-wing military dictator that the Tea Partying atavists don't love.

A.M. Mora y Leon Sat, Oct 1, 2011 10:02:34pm

That's not what this is about. Do you like a $55,000 pension from your Social Security contributions? Or do you like a $18,000 pension from the same amount of money, stealable at any time with zero legal recourse if it is. Social Security is neither social nor secure. Politicians on both sides have been using it as a slush fund for years, taking our real contributions and leaving behind with worthless IOUs (non-recourse bonds which are the lowest grade you can get.) None of this has anything to do with Pinochet. It has everything to do with our future. Your choice - $18k with no guarantees, or $55k with full property rights?

If Pinochet is the whole story, ask yourself why Chileans have not gotten rid of the system through five socialist governments that followed him? They certainly had the chance to do that. Ask yourself why they didn't?

freetoken Sat, Oct 1, 2011 10:16:12pm

re: #2 A.M. Mora y Leon

None of this has anything to do with Pinochet.

Yes, it does, because the right wing writers (such as you linked) consistently adulate leaders trying to do end runs around the democratic process in making changes (see Wisconsin and Florida with their new governors).

And, your claim of "Your choice - $18k with no guarantees, or $55k with full property rights?" is specious because it doesn't represent the recent past or present in US retirement.

Social Security in the US is not intended to be an investment program - it's a social program to ensure that old people don't end up totally penniless. Any person in the US right now, whether they are eligible for SS or not, are able to set up a vast array of investment vehicles intended for retirement income.

A.M. Mora y Leon Sun, Oct 2, 2011 7:32:05am

What's undemocratic about putting one's choice of social security plans up for a vote? In chile, this was done very democratically - first through the legislature in november 1980 (same day Ronald Reagan was elected) and second through worker preference. After the legislation had passed, workers were told that they could stay in the system as it is (and take home that big $18,000 goobermint pension if the cash was there) or switch to the new private system, which included disability benefits and life insurance, and take home a likely 4% return under private management. The 4% never materialized - what Chileans ended up with was a 9.23% compounded annual return over 30 years which was more than twice the amount forecast. That's where the $55,000 pensions come from - John Tierney of the NYT did a calculation of his own pension and came up with the 18-55 ratio I cite. Social Security, by contrast, features a 0% return and diminishing - newer workers will get a negative return before the well goes dry in 2036. Considering that one contributes 12.4% of one's income to it, that's a heck of a lot of money that could be put to productive use in creating $55k pensions - and workers would no longer have to squirrel away an additional 7% of their paychecks on 401ks to make up for the bad government management and severely crappy returns of their SS contributions. Why is it my 7% is supposed to be the meat of my retirement and my 12.4% is supposed to be some sort of supplement? Not surprisingly, under these conditions, 75% of Chilean workers opted for the new system right off the bat and 97% are in it now. The old state socialist system is favored by 3% of workers. That was their choice.

Not sure what you mean by 18-55 not representing the recent past or present in US retirement. One thing we do know: Private outperforms public. Workers here should have a choice same as Chilean workers.

Once again, if Pinochet was so bad, why didn't five successive socialist governments return the system to its former form and expropriate those excess pensions those workers saved for "the better good"? Somehow it did not happen despite those governments' loathing of Pinochet. You know of course that those socialist governments erected a big statue of Allende at the presidential palace while ignoring Pinochet, don't you? Despite that, those five successive socialist governments kept the Chilean system - why?

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