In his May 7 column, New York Times columnist John Tierney wrote that his readers were "at least half-right" to call him a "superficial nitwit" for his April 26 column, in which he used the example of his "Chilean friend and economist" to compare Chile's privatized government pension system favorably to Social Security. Media Matters for America noted that Tierney's April 26 column ignored the Times' own extensive reporting on problems with the Chilean system. Tierney said he was postponing a discussion of "the relative risks of the Chilean and American systems" as "a question for another column," prompting Media Matters to suggest that he read the Times before writing that follow-up.
But it appears from his May 7 column that he has yet to do so.
Writing in his May 7 column that "[h]istorically, stocks have yielded returns two to three times what Social Security pays," Tierney then noted that "stocks could yield much lower returns in the future, as critics of private accounts have pointed out." But this meager acknowledgement constituted the full extent of his promised discussion of the "risks of the Chilean ... system" He devoted the rest of his column to warning of the "political risk" built into Social Security, since self-serving politicians control tax rates and benefits. Noting that the Treasury securities held in the Social Security trust fund will have to be repaid out of general revenues in order to pay future benefits, Tierney warned: "My pension depends on 535 politicians who will be asked to vote for steep tax increases or budget cuts that they fear could cost them their jobs." (He declined to provide an example in Social Security's 70-year history when politicians had successfully robbed beneficiaries of their rightful benefits.)
Missing altogether from his May 7 column was any mention of two additional "risks" of the Chilean system, which the Times reported on January 27:
- Exorbitant management fees: "Among the complaints most often heard here is that contributors are forced to pay exorbitant commissions to the pension funds. Exactly how much goes to such fees is a subject of debate, but a recent World Bank study calculated that a quarter to a third of all contributions paid by a person retiring in 2000 would have gone to pay such charges."
- Low participation and high costs to government: "The government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. Many others -- because they earned much of their income in the underground economy, are self-employed, or work only seasonally -- remain outside the system altogether. Combined, those groups constitute roughly half the Chilean labor force. Only half of workers are captured by the system."
Tierney also exaggerated the degree of public support for Chile's privatized system, writing that "Chilean workers kept mentioning to me" that despite the increased risk, "they preferred that [risk] to watching it all disappear into politicians' hands." But the Times' January 27 article quoted an unnamed government official who said: "If people really had freedom of choice, 90 percent of them would opt to go back to the old system."