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Reagan’s Legacy Lingers

reaganRepublicans celebrate Ronald Reagan for winning the Cold War, reviving the economy, and restoring American confidence. Yet this is actually to understate his contribution to his party. A technical decision of his administration in 1981 lit the fuse for an explosion of stock ownership that is transforming American politics.

Prior to that time, the dominant form of employee pension was the “defined benefit” plan. Labor unions negotiated cash benefits for each employee, calculated on the basis of years of service and a percentage of annual pay. Management, not workers, assumed fiduciary responsibility for plan investments. Government provided tax breaks to encourage this.

But the country’s industrial malaise in the 1970s put many of these plans at risk. Companies went bankrupt holding millions of dollars in pension liabilities. Troubled firms with solvent plans became takeover targets for investment bankers, who questioned the rationality of freezing pension capital within companies that needed to retool. The Democratic Congress responded to worker anxiety by tightening fiduciary regulations on management and by mandating a business-funded …

Social Security Wins And Losses

Bill clintonThe press coverage of Bill Clinton’s Social Security plan has tended to emphasize that it is complicated. It would be closer to the truth to say that it does not exist. If it is complicated, it is for the same reason Whitewater was complicated: It was designed that way, to obscure its fraudulence.

In his State of the Union speech this January, Clinton urged that about 60 percent of the federal budget surplus be devoted to replenishing the Social Security trust fund. Within the week, Republicans were charging Clinton with an accounting trick. Since most of the federal surplus comes from the trust fund in the first place-right now, Social Security brings in far more in payroll taxes than it pays out to retirees-the administration was double-counting by pretending to add money that was already there.

Caught in what appeared to be a lie, the administration and its defenders did what comes naturally: say that “everybody does it.” Republicans and Democrats alike had for years pretended that the trust fund …