The People’s Pension
James Galbraith and Dean Baker have praised Eric Laursen’s new book, The People’s Pension, for its riveting account of the history of the social security system and the ongoing wars around it. But what caught our attention at Capital Institute was Laursen’s intriguing argument that social security should be viewed as a living and ever evolving program that can be revitalized to serve as a vehicle for democratizing investment in a more sustainable, placed-based economy. As David Graeber of the Occupy Wall Street Movement says, The People’s Pension could enable “a fundamental change in public thinking about the very nature of public goods.”
Capital Institute:The People’s Pension was published by a small anarchist collective, AK Press. Can you explain why this is not as surprisingly as it might seem?
Laursen: Early anarchist thinkers in the 19th century believed that the way to reorganize society was around mutual aid. Social insurance grew out of the concept of mutual aid, whereby working people would get together to provide health benefits and survivors’ benefits to each other, before the days of any social programs, in the early part of the industrial era. So for an anarchist press to want to publish the story of social security makes total sense. Social security in fact has quite radical roots, although its advocates among progressives, who are now largely on the defensive, would rather not call attention to the fact.
Capital Institute: You make the point that those attacking the social security system disparage the word “entitlement.” Nonetheless we must not lose sight of the fact that the beneficiaries of social security are indeed entitled to it.
Laursen: Social security is not just another government welfare program. It has a dedicated payroll tax that funds it and the benefits paid out are based on what you contribute according to your income over a certain period of years. In a real sense social security belongs to working Americans. They own it collectively. It is not something Washington gives us out of the goodness of their hearts.
Capital Institute: You describe in The People’s Pension how social security has been drawn into a deepening political crisis. Where did it start and where do you see that crisis heading?
Laursen: Elements of the policy-making elite in the country have been trying for 30 years to find a politically palatable way to cut social security. That is a problem that will only increase over time. Effectively, more and more government is run by people who feel it is imperative to shift the burden of running social programs off of government and on to individual households.
Progressives are increasingly marginalized in this discussion. Even Obama is making deals. That means we have this social security program that the people own, yet the individuals who are entrusted to run it are not as trustworthy as they used to be.
Capital Institute: If policy makers cannot be trusted to run it, you suggest social security should be delinked from the political process.
Laursen: Now it is run by the Secretary of Labor and Treasury and the Department of Health and Human Services and a couple of other appointees of the president. Maybe the trustees should instead be elected by the people who participate in social security – paying into it and receiving benefits. Some say that is a scary idea, that those people could be manipulated and we could get a group of trustees who want to dismantle social security. I would say that is already a threat.
Capital Institute: You also propose diversifying the investment of social security funds out of treasuries.
Laursen: This idea was actually proposed by Arthur Altmeyer, the first commissioner for social security. He was brought before Congress and asked, “What are you going to do with this money?” He suggested that it could be invested in health care and housing that directly benefited retires and in other enterprises with a social purpose. Arthur Vandenberg, a Republican senator who was a supporter of the Social Security Act, was spooked by this idea because he was concerned it would make social security a player in the economy.
Maybe this is a good time to revisit that idea. If social security belongs to the people, maybe the people should have a say in what it is invested in collectively. There is no fundamental principle that says the trust fund has to be invested in treasuries.
We have an aging population and we have to deal with the rising cost of caring for them. More and more of retirees’ social security checks goes to out of pocket medical expenses. Why not invest social security funds in such a way that they have a direct impact on those costs? How about investing to support cooperative efforts that communities are engaged in to help the elderly, community centers, congregate housing? Why couldn’t some of that be funded through payroll taxes?
Capital Institute: You also suggest social security funds could be invested in other ways that boost place-based economies.
Laursen: There are a lot of other exciting projects that generate a direct economic good that the money could be used for and that would throw off some return. One proposal I outline in the Epilogue to The People’s Pension is to decentralize social security. Instead of running all that money as one big pool, you could take it and you could slice it up regionally and have grassroots groups invest the money to create sustainable local economies focused on, for example, clean energy and rural and urban agriculture. It could be invested in cooperative businesses, so that, for example, we could start to revive parts of rural America and inner cities that have been left behind economically.
The other benefit of this approach would be to raise awareness that social security doesn’t exist by itself, it is part of a living economy. It would have an economic impact not only because the people who get social security benefits spend money but also because the funds themselves are invested in a decentralized way. You would have more of a tight connection, that’s visible to the public, between what the money is used for in terms of benefits and how it is invested. So I am arguing for a way to use social security for people to reclaim control of the economy at a more local, human level. If you go the more localized route, if you go decentralized, you start to talk about creating sustainable economies that don’t use up all of our resources and spend us into oblivion. The goal would be to invest in what are the basic needs of people.
Capital Institute: But how would you apportion funding to more sparsely populated rural communities under this decentralized approach?
Laursen: You could have some cooperative projects built that were not geographically based. So people who live in rural areas could join with others in urban centers, for example, on projects that both have an interest in promoting.
I think this approach addresses what was one of the flaws of the New Deal to begin with. It created a lot of good programs but once it was in place, it followed a bureaucratic, top-down model. The Social Security Administration was run by really remarkable, talented people for a long time, but over time people have come to feel the program doesn’t belong to them anymore, that it belongs to Washington bureaucrats. How do we get past that? How do we make it a more participatory system?
My thesis is that social security is always a work in progress. Even FDR regarded it as that. If it just stays the same and doesn’t respond to things that are changing, it atrophies and people lose empathy with it. The idea that social security should change scares people in the progressive movement because they think it creates an opening to dismantle it. I would argue that the biggest risk to the system is that people will stop challenging it.—Susan Arterian Chang