For the first time today, while picking around the right blogosphere for comments on the bankruptcy bill, I stumbled across Polipundit
. The almost-definitely-white "DJ Drummond" has a piece
reacting to an op-ed Robert Reich wrote in USA Today
on Thursday. DJ doesn't bother to take issue with the actual content of Reich's argument, that the "crisis" is manufactured, that those who think Social Security will go bankrupt by 2042 are basing their claims on a chart showing absurdly low economic growth, and that private accounts based on the whims of the stock market go against the very notion of retirement "insurance." No, DJ won't bother to argue with a former Social Security trustee on all that, instead calling Reich a "Socialist" (we've apparently returned to 1959-era insults). And he's particularly incensed by Reich's opening line:My grandfather lost all of his savings in the Great Crash of 1929. He never trusted the stock market after that. But he kept working, and by the time he retired, he had a tiny nest egg. It still wasn't enough to retire on. He and my grandmother relied on the Social Security checks they got every month. Granddad died at the ripe old age of 91.
Nice, right? Pretty much shows that without Social Security, Reich's grandfather wouldn't have been able to retire.
Well, here's the DJ's take. Scratch it:It would seem to the reader, that Reich is suggesting his grandfather was a hard-working man who invested in the Stock Market and lost everything because of it. But if you look more closely, that statement simply cannot possibly be true the way Reich wrote it.
Let’s start with the first part, that Granddad lost everything in the “Great Crash”. Could that have happened? Well, there’s a problem with that claim. The Dow Jones average on January 2, 1929 was 307.01; on December 31, 1929 it was 248.48.
A drop of 50 points, first of all, is significant when there are only 300 points to begin with. That's 16%. Furthermore, by September 1929, the market was hovering near 400, and by November it hit 145. That's well over 50%. By its ebb in 1932, the stock market was at 32. That's a 91% drop from it's height. How does DJ react to this?There’s no question it went down, and was in decline through 1932, but it never went down to 0.
Yeah, it doesn't have to (and in fact, couldn't, otherwise there would be no stock market). But there were tons of stocks that did fold. And DJ knows that. He just won't tell you.
In addition, the Dow average is just that, an AVERAGE. I don't think DJ has personal knowledge that Robert Reich's grandfather held index funds which covered the whole market. He has no clue what he had. And the notion that nobody went broke from the stock market during the Great Depression is ridiculous. Stocks lost $5 billion in value on October 1929. The argument seems to be that "well, he could have lost a lot, but not possibly EVERYTHING." Semantics. You don't have to actually lose every single solitary cent to be broke; just enough to not pay creditors.
DJ's argument continues, trying to uncover (like Geraldo in a vault in Chicago) exactly how Robert Reich's grandfather lost all his money, and how safeguards like the FDIC prevent some of his hypotheses from ever happening again. Which completely misses the point. The point is that Reich's grandfather had an unexpected financial disaster, and Social Security helped him have a decent retirement; it doesn't matter HOW he came to have that disaster. DJ might not know this, but people go through financial ruin all the time, even today. They lose their nest eggs. They get hit with humongous medical bills. They can't pay their credit cards off. And with the passage of the MBNA Payoff Bill, they can't even file bankruptcy and get a fresh start. Reich's point was to highlight the benefit of Social Security as INSURANCE to safeguard people who have endured financial hardships. That's why it's reduced poverty among the elderly from 50% to 8% throughout its lifespan.
Here's DJ's parting "thought":For Reich to conjure up the 1929 Stock Market as a factor in the current Social Security debate, is about as rational as for the FAA to consider the Hindenburg Zeppelin disaster in a review of commercial airline safety. It’s simply dishonest from the start.
For DJ Drummond to look at the 1929 Stock Market, and not the fact that Social Security has kept Robert Reich's grandfather and millions of others out of poverty for decades, is even more dishonest. It focuses on exactly the wrong thing.