10-10-07, 10:16 am

Senator Hillary Clinton, frontrunner for the Democratic presidential nomination, has come forward with a plan to establish federally supported 401k retirement funds as a supplemental pension program for low and moderate income citizens. Even though the proposal has a positive funding idea (freezing the existing estate tax, which Republicans denounce as a “death tax” and want to abolish), it is still a lousy idea.

Remember that 401k retirement accounts were a corporate and conservative Republican policy to provide tax incentives for stock market based individual retirement accounts for employees who had no public or union based retirement plans. They were intended in part to prevent progressive reform and expansion of Social Security or for that matter to discourage non-union employees from unionizing in order to get union pension benefits. They are really a bad idea for everyone except those on Wall Street or what is euphemistically called the “financial services industry” who would make out very well from such a development, not of course as much as they would from Bush's Social Security privatization plans, but politically those plans are very much dead in the water.


Progressives should oppose this plan and make it clear to Clinton that she will not be put in office to enact conservative policies as an alternative to the extreme right-wing policies of the Bush administration. When tens of millions of Americans voted in 1992 for her husband, a charming man whom they didn't know who spoke in glittering generalities, they were voting to end the Reagan-Bush era and reverse Reagan-Bush I ultra-right policies.

When Bill Clinton came forward with a health care proposal (led by Hillary) which would have established federally regulated HMO's under the guise of universal health care and lost, fought ferociously to enact the NAFTA agreement against labor and most progressive forces in the U.S., and “won,” and pursued fiscal conservative policies that essentially turned his back on the cities and working people, he set the stage for the right-wing Republican victory in 1994 and helped to create the political climate that enabled Bush II to steal the 2000 election.

It must be made clear to Hillary Clinton, who benefits tremendously from the fact that she is clearly better than any Republican even if she is near the bottom of the Democratic candidates in regard to substance, that she can't be the candidate of Wall Street, the insurance companies, the corporations and the rich, offering then safer stock portfolios, and expect to win the active support of working class people who are the core constituencies of the Democratic party by offering them in regard to pensions and health care, among other things, a slightly less painful version of the system which right-wing Republican governments have foisted on them.

Strengthening the existing Social Security system by doing what its architects envisaged in the 1930s, that is, shifting the costs of the plan onto general revenues (progressive income and corporate taxes) in order to expand and upgrade benefits for low and moderate income people makes far more sense than federally supported 401ks. Social Security pensions aren't tied to the stock market and individual accounts vary based on salary contributions as averaged over a thirty-five year work period.

There certainly are inequities in the present system – the regressive payroll taxes and the problems that low income workers who have significant periods of unemployment have to face. But there are also benefits: no brokerage fees, no churned accounts, and of course no major loss of retirement income due to stock market decline. Reforming Social Security by shifting its funding formula away from regressive payroll taxes toward progressive income and corporate taxes would both deepen the commitment of the government to maintain it at a high level and provide the funding that would enable the government to maintain it at a high level, sharply improving benefits for low and moderate income people.

Hillary Clinton may make more friends and influence more people on Wall Street with her 401k plan, just as the insurance companies who “administer” the national HMO system for profit may possibly be ready to accept her plan for a federally regulated and supported HMO system (state-backed health care capitalism) as they weren't in 1993, but it should be made clear to her by progressives that the people whom she depends on to get elected and then supported can see through these “closet conservative” policies.

While I as an historian have never been an admirer of Harry Truman's administration, he did say something that Clinton should ponder. I am paraphrasing: If the American people are given the choice of voting for a Democrat masquerading as a Republican and a real Republican, they will choose the real Republican. In her husband's case, that didn't happen in 1992, but it did when it became clear to voters where the Clinton administration was going, in 1994, and set the stage for 2000.

After the horrors of the Bush administration, the 2008 election is Clinton's or any other Democratic candidate's to lose. But policies like those which she has come forward with concerning health care and pensions, her general silence on labor questions, and her failure to articulate a serious policy to end the Iraq occupation and insure that the unilateral military interventionism of the Bush administration will end with that administration, will give right-wing Republicans a chance to regroup and do to her administration what they did to her husband's.

To that progressives must say never again! It is not a case of supporting a lesser of two evils any more. Evil, in the form of the Bush administration has become so sinister and so grotesque, that it can only be defeated by something that is positive and good, a government that literally rejects and reverses its domestic and foreign policies.

--Norman Markowitz is a contributing editor of Political Affairs.