What we owe Monica Lewinsky

What we owe Monica Lewinsky

An article that appeared in the Politico yesterday stirred people up. Written by Alicia Munnell, it presents a case for thinking that retirement, that dream which rests upon the foundation of social insurance – social security and medicare – is over for the millennials, who should just plan to work until they are seventy, and then I guess go off to the euthanasia center.

The article reminded me, once again, of one of my strongest beliefs: that we as a nation owe a big thanks to Monica Lewinsky.

By all accounts, Bill Clinton came into his second term determined to care though a very ruthless neo-liberal plan. The era of big government was over. And part of it he succeeded in cramming through. He signed into law “reforms” that deregulating mortgages and led to the great crash of 2008. And he got rid of #GlassSteagall, which made our response to 2008 concentrate on saving the great too big to fail banks.

But the big piece de resistance, for the Clintonites, was privatizing social security. In November, 1996, Mother Jones had a big article about the drive among third way dems to privatize social security, quoting such stalwarts as members of the Social Security Advisory Council who were all about “reforming” SocSec, and Dems who were talking about Clinton in a “Richard Nixon goes to China” mode becoming a real statesmen and screwing us for generations to come. The vice president of the Democratic Leadership Council – remember that Trojan horse – were quoted as being cautiously optimistic that Clinton would lead the way on “reform”.

But the state of play in 1996 changed drastically on January 17, 1998, when Drudge reported that Clinton was being investigated for an affair with an intern. Yes, Monica Lewinsky! And that day did more than anything else to turn the tide. It shows that one person can make a difference.

The scandal did not keep Clinton from happily signing mortgage legislation that led to disaster, or dissolving the regulatory structure that had kept American banks from the gorge and crash syndrome to which they are inherently heir. But these pieces of legislation, however bad, are not as bad as the Cato-touted reforms that Clinton’s Social Security “advisors” were hoping to jimmy through.

In the aftermath, in 2001, Clintonite Alicia Munnell laid out, in a Brookings Institute paper, what was probably cooking in the white house in 1996-1997. It has some big gems, for instance, a confident assertion that government pension funds show how awesomely private investment for public good can be managed. This has, to say the least, not aged well. And it has smooth as butter prescriptions that went into Bush’s own attempt to privatize social security:

“One answer is to limit the size of a fund, creating new funds that are separately (and privately) managed once the public fund reaches a certain size. This practice is already used in Sweden, which has six funds to manage accumulated surpluses in its partially funded public pension system. The government has put limits on how much of a single firm—and of the total market—can be owned by individual funds and by all the funds collectively.

But how big is too big? One standard would be to limit the size of any one Social Security investment fund to roughly the size of the largest private investment firm. In 1999 Fidelity was the largest, with 3.3 percent of domestic equities, followed by Barclay’s Global Investors with 2.1 percent and State Street Global Advisors with 1.6 percent. Once a Social Security investment fund reached, say, 3 percent of the market, it would not receive any new investment funds from Social Security surpluses. Instead, the government would establish a new investment fund, again privately managed, to receive new funds. A somewhat more convoluted mechanism for limiting size would involve distributing Social Security funds among fund managers in proportion to 401(k) contributions.”
How sweet the sound of mixing 401k, God’s worst pension substitute, and Social Security!

So here’s to you Monica. We owe you this one.