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March 2005, Volume 7, Number 3
Edited by Jim Hightower and Phillip Frazer
He predicted Social Security would go broke in 10 years and said the system should give people 'the chance to invest money the way they feel' is best.
USA Today, citing George W. Bush's determination to privatize Social Security.
The uniqueness of this prediction by our privatizer-in-chief is not in what he said, but when he said it: way back in 1978! Yes, the very guy who is now warning us so apocalyptically that our Social Security system "will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now" was making the same erroneous, Chicken Little prognostication three decades ago while running (unsuccessfully) for a West Texas congressional seat. In fairness, that was during his drinking period, so maybe he was DWI (Driving While Ignorant) when he said it—but what's his excuse today?
Let's be clear about one thing: Social Security works. It is a phenomenal success, having achieved (and continuing every day to achieve) its noble purpose, which was stated plainly by FDR when he signed the legislation in 1935: "We have tried to frame a law that will give some measure of protection to the average citizen...against poverty-ridden old age."
Social Security was never meant to be an elaborate investment scheme geared to maximizing returns, but a simple, straightforward social insurance program through which all Americans strive to see to it that none of us spends our golden years destitute. The key word is "security"—it's not intended to be yet another rollthe- dice stock market gambit. By putting money from each of our paychecks into this common pool during our working years, each of us is guaranteed a modest monthly check (now averaging $1,184) to provide a basic level of dignity, independence, and security in retirement.
Before this program, two thirds of Americans spent their last years in cold, hard, often-desperate poverty. Today only 10% of seniors fall below the poverty line.
The program has achieved its goals with stunning efficiency, holding administrative costs to a mere 0.6% of annual benefits—a level that should make private pension executives blush at their own profligate level of 15 to 20% of benefits siphoned into corporate overhead.
Yet this is the program that George urgently says he must "fix." Because Social Security enjoys phenomenal public support (drawing approval ratings of nearly 90%), he cannot assail the program itself. Instead, the Bushites and a menagerie of corporate think-tankers, right-wing pontificators, and PR consultants are posing as the "saviors" of Social Security. And oh, what a show they've been putting on, wailing and moaning dramatically that our public pension fund faces a crisis of Biblical proportions! "A Titanic," shrieked one of our saviors. "Train wreck," shouted another. "On the verge of collapse," squawked still another. A fourth gasped, "Cancer."
Driving all these alarms of impending doom, which antigovernment ideologues have been ringing for 30 years, is one big lie: Social Security is going broke. "First step," Bush solemnly declared in December, "is to make sure everybody understands we have a problem."
If this sounds eerily like an echo of the Bushites' five-alarm warnings in 2002 that Saddam Hussein had WMDs that were threatening America with "a mushroom cloud," it's because they are following the exact same political playbook for their assault on Social Security: Assert The Big Lie of a looming crisis while simultaneously demanding that Congress authorize The Big Rush into the ideological abyss where The Big Mess awaits.
George W proclaims that the drop-dead date for Social Security is nigh upon us. Prepare for 2018, he bleats—only 13 years from today! In that year, he direly forecasts, "you're either going to have to raise the taxes of the people or reduce the benefits." A tsunami of retiring Baby Boomers will have hit the program, says the doomsayer in the White House, and the trust fund will cross the line "into red."
Spooky. Only, Bush is lying. What happens in 2018 is merely that the amount of money being paid out to retirees will begin to exceed the amount being collected at that time in Social Security taxes. A crisis? Not at all. Indeed, the system has slipped into such a temporary deficit several times—and each time, the fund's trustees did what they can do again in 2018: Dip into the program's surplus, just as a family would dip into its rainy-day fund.
Surplus? Yes. What the Bushites try to hide is that Social Security actually is extraordinarily healthy. Thanks to modest adjustments made by Congress in 1983, the Social Security trust fund has been collecting way more in taxes than it pays out (about $150 billion will be stored up this year alone), and it will continue to amass these huge surpluses until at least 2018, when it will have some $5 trillion in assets. Far from being "flat bust," the system can then begin drawing on these monies. Or, with relatively minor tweaks in financing the program, we can avoid the deficit of 2018 altogether.
But even if no adjustments are made, Social Security is so sound financially that it can guarantee that every retiree will continue to receive full benefits at least until 2042 (the nonpartisan Congressional Budget Office says until 2052)—a time so distant, by the way, that nearly all of the dreaded Baby Boomers (including the Bushites) will be dead. Okay, concede the Bushites, it's not 2018, but 2042 when the bell tolls. Picky, picky. But that year the program really will be absolutely "exhausted and bankrupt," as George flatly declared in last month's stateof- the-union diatribe. So, see— we're still right that Social Security is doomed unless we perform radical surgery on it, pronto.
Hold your scalpel right there, privatizer- breath. Saying that the program goes kaput in 2042 is another lie. Again, even if Congress does nothing at all to adjust the financing, the trust fund will still be taking in enough money in payroll taxes after 2042 to pay 80% of currently scheduled benefits for all retirees for the foreseeable future—at least until 2075. Name me a corporate pension plan that can make such a statement!
Well, say the wild-eyed fixers to younger Americans, if the "crisis of 2018" (or 2042, or whatever) doesn't scare you, try this: You're more likely to see a UFO than to see a Social Security benefit check in your lifetime.
The claim here is that even if the system does not go bankrupt, future retirees sill will be stiffed because the trust fund has been looted repeatedly by previous presidents to finance their pet political projects. The Bushites tell us that these scoundrels took the trust fund's cash, spent it, and left the fund with nothing but a bunch of "worthless IOUs."It's "all trust and no fund," snorted one privatizer.
Two problems with this screed. First, George himself has been the most energetic raider of the trust fund in history, taking billions out to cover both his war adventures and multitrillion-dollar tax giveaways to the rich.
Second, those "worthless IOUs" are U.S. treasury bonds, the next best thing to gold. Repayment of these bonds is a solemn obligation of our nation's government. They have the same status as the government bonds held by the likes of Bill Gates and other Wall Street high rollers, as well as by Japanese pension funds, the government of China, and other foreign investors. By law, the government MUST pay the principal and interest on all of these debts, specifically including the money "borrowed" by Bush and his predecessors from the Social Security trust fund. Only two things could keep Uncle Sam from making good on this pledge to retirees. One would be a general fiscal collapse in which the U.S. government defaults on all of its debts, essentially declaring bankruptcy. The other would be passage of a law that singles out seniors, declaring by fiat that the government's general revenue fund will not pay the debt it owes to retirees. For our country to default on its debts is unthinkable, and for Congress to decide that Bill Gates and foreign bondholders must be paid but that Grandma and Grandpa America will not have their bonds honored is unforgivable.
Bluntly put, anyone who tells you that our nation's retirement trust fund is either empty or an empty promise is lying. The trust fund is there, it is sound, and its promise is absolute…unless we let Bush and Congress mess with it to suit their ideological fancy.
Social Security needs tweaking, not smashing. Yet by constant crisismongering, Bush & Gang have bamboozled much of the media and a significant percentage of the public (especially younger people) into believing that the problem is immense, immediate, and can only be resolved by "bold and decisive action." In a word, privatization.
Oops, my mistake. Bush propagandists have recently decreed to the media that his scheme of "private accounts" for Social Security must now be referred to as "personal" accounts. It seems they've learned that "privatization" stinks as a sales term, polling so poorly that Karl Rove is trying to ban it from public use. Even though Bush himself had been parroting the "private account" phrase endlessly since the November election, he suddenly turned prickly in January and scolded a reporter for using it. "You mean the personal savings account," he snipped.
Another lie. No matter what kind of lipstick they put on their pig of a proposal, it's privatization they're pushing. Pathetically, however, most of America's corporate media immediately capitulated, switching the language to the more pollfriendly "personal accounts."
At first, it sounds like there's something good in Bush's plan: Let workers "own" their retirement by taking some of their monthly Social Security tax payments out of the system and investing that money in the stock market, thus giving them the possibility of retiring rich. But the plan is riddled with lies, sleights-ofhand, hidden costs, voodoo, and wishful thinking.
Here are some of the Bushites' claims, versus the reality:
We're only letting workers divert 4% of their wages into these private accounts, so what's the fuss? The fuss is that they're using Bush-style math to make the diversion of money seem trivial. The Social Security payroll tax is 12.4% of each worker's wage, so siphoning off four percentage points means a 32% reduction in payments going into the trust fund—a one-third cut that would drastically undermine the program's financing and force a huge cut in benefits.
Converting to private accounts will save Social Security. Since many workers will get retirement money in the future from the stock market, the government will not have to pay out as much in benefits, and, seamlessly, the system will be made "permanently solvent and sustainable."
Sure, Santa Claus, but what about those "transition costs?" Social Security takes in money from today's workers and pays out to yesterday's workers. Bush's plan would break the flow, diverting up to a third of the incoming funds while still having to pay all of the out-going obligations during the next several decades. This will quickly drain the trust fund...and more. Even on the wild assumption that the stock market will some day be a retirement gold mine, where will George get the money to pay benefits in the interim? By borrowing. A lot. When pushed, the White House admits that transition costs will run about $2 trillion, but even that's a lowball deceit. It only covers the first decade of the transition. Decade two will cost $3 trillion, decade three $5 trillion, and decade four another $5 trillion. That's $15 trillion (TRILLION!) worth of extra debt—plus interest—to be piled on the backs of future taxpayers in the vainglorious hope that someday privatization ideology might produce some savings in the distant future.
Why should Americans be stuck with some stodgy guaranteed payout from Social Security when the stock market can double that or better? C'mon, let's let people do better than a government check— let's let 'em get rich! If stocks were such a sure-fire ticket to profits, why wouldn't the Bushites take, say, the Pentagon budget and put it in the market each year? The truth, of course, is that stocks can do very well— but which stocks, in which years? If you'd had your Social Security nest egg in Enron and cashed out for retirement in 2000, you'd be in high cotton. But what if 2002 was your retirement year? Enron stock plummeted from $90 to 57 cents a share in that span. Likewise, in 2000 the S & P 500's index of stock values topped 1500. In 2003, it was only half that. Besides, there's another little nasty hidden inside Bush's privatization fantasy: Fees. Tens of millions of workers will have their own private accounts, each run by a gaggle of Wall Street fund managers eagerly collecting (and creating) fees. As with your telephone or credit card bills, fees will multiply like bacteria—even Bush's handpicked Social Security "reform" commission admitted in 2001 that the administrative costs of a privatized system will run 10 to 30 times more than our present system—and these fees will eat most of the gains that workers are theoretically supposed to get from investing in the market.
Still, we're offering people free money to spin the wheel...and maybe hit a big one. And guess what, spoilsport? Polls show that the public supports our idea of private accounts! There they go again—another flim-flam. It's true that on the general question of whether people should be allowed to invest some of their Social Security money in private accounts, 54% said it was a good idea. But here's the trick: The question fails to mention any of the tradeoffs in Bush's scheme. When informed that the government would have to borrow $2 trillion in the first decade for transition costs—and that their guaranteed Social Security benefits would be cut—69% opposed the plan and only 21 percent approved. Indeed, even among young people 18-34 years old, a whopping 73% oppose Bush's privatization plan when they hear the downside. Ironically, the age group that the Bushites are counting on to push privatization through is the one it will hurt the most: young people. Realizing that older folks are adamantly against this grab for their retirement money, Bush's operatives exempted everyone 55 or older. But, they calculated, 20-40 somethings don't pay much attention to retirement and are more open to the lure of the stock market. Perhaps, but they're not saps. Here are the numbers:
Middle-class workers who're now 50 would be hit with a 10% cut in their guaranteed benefits when they retire in 2022. Today's 30-year-olds who'll retire in 2042 will be cut by more than 25%. By 2075, retirees will have their Social Security benefits cut almost in half.
It's more than numbers that the Bushites are hiding—it's their true intention, which is to gut the basic premise of Social Security. Today, the program provides retired middleclass workers earning about $65,000 with an annual income of $26,400— about 42% of what they were making before retirement. That's not the life of Reilly, but neither is it poverty. Bush would cut that guarantee for future retirees to $14,600 a year—barely 20% of their preretirement incomes. These extremist ideologues abhor the very idea of a government program that works.
"Social Security is the soft underbelly of the welfare state," says Stephen Moore, a privatizing guru from the far-right-wing Cato Institute. "If you can jab your spear through that, you can undermine the whole welfare state."
These people are not conservatives. They are utterly irresponsible, reactionary social theorists, and they now have George W as their point man. They're not out to reform Social Security, but to drive their spear through it, killing FDR's guarantee "against poverty-ridden old age" and replacing it with a new guarantee of insecurity. This is a fight not over a program, but over what kind of society we want to have.