PortFolio Weekly

PortFolio Weekly
February 15, 2005

The Real Threat to Social Security

by Jim Newsom

Here’s something you need to understand: The Social Security “crisis” being trumpeted by Bush and the dittohead Republicans is a straw man, a red herring. It is a trumped up emergency even more bogus than the prewar justification for the Iraq catastrophe. The consequences, if successful, are infinitely more far reaching for the people of this country.

The concerted P.R. onslaught is just beginning, so you’d best be prepared. The rightwing columnists, talk radio gurus, TV mouthpieces and the lockstep Congressional and state Republican leaders will all be singing from the same score. They will tell you all manner of tall tales designed to frighten you and set generation against generation. They will throw in the “L” word (liberal), the “T” word (taxes) and the “B” word (bankruptcy) and attack the most successful, most efficient government program of all time with every conceivable mixture of tar and feather.

Do not be misled. This is not about fiscal responsibility; this is not about the welfare or financial well-being of future generations. This is about radically altering the societal fabric of the United States.

Just as he knows that the narrowest reelection margin in history does not constitute a mandate, George Bush must surely know that Social Security is hardly in crisis. But, just as lack of evidence did not prevent his preplanned excursion into Iraq, conflicting evidence will not deter the President and his crowd on this one. They control all of the federal government now, and they intend to exercise power as ruthlessly and relentlessly as is necessary to permanently implant their anti-social, anti-opportunity, anti-people philosophy as the law of the land.

When he first began hyping the “crisis” and his privatization “cure,” I admit I was mystified as to what the President’s motives might be. What possible benefit could he and his fatcat buddies reap from pulling the safety net out from under the elderly?

Perhaps it was just another way to suck funds into the stock market casino for Ken Lay’s successors in greed to gamble with, while creating new fees for brokers and financial service providers. In the aggregate this might make sense, as large sums would be defrayed into stocks, bonds and mutual funds. But on an individual-by-individual basis, the fees generated from 2% of the average guy’s income wouldn’t be worth a broker’s time to pursue.

Nope, there must be something more devious going on here, I thought. And there is.

At the Republican convention last summer, President Bush unveiled a new buzzphrase: “Ownership Society.” Included within his outline for this new American order were more tax cuts on capital gains, making the “temporary” tax cuts of his first term permanent, and the privatization of a portion of Social Security.

The phrase itself---“Ownership Society”--- sounds harmless, even desirable. But you have to read between the lines to see what it really means. In George Bush’s Ownership Society, everyone is on his or her own. You have no responsibility to society or the nation as a whole, and it has no responsibility to you. The cornerstone is the dismantling of the Social Security system, using the same scare tactics perfected in the runup to Iraq.

Most readers of this magazine are pretty well informed, so I needn’t point out that Social Security is stronger today than at any time in its 70-year history. This is because of adjustments made more than twenty years ago when Congressional leaders of the time reacted to an immediate need caused by overly generous benefit hikes and high unemployment in the 1970s, and a longer term concern looming out in the distance when the Baby Boom generation hit the retirement years.

If you were in the workforce at the time, you may recall that on April 20, 1983, President Reagan signed into law a bipartisan commission’s plan to ensure the solvency of Social Security for both the short term and the long haul. As part of the plan, the retirement age would gradually rise from 65 to 67 over a 25 year period beginning in 2003, and the payroll withholding tax rate would rise from the then-current 6.7% to 7.65% by 1990, with a matching increase in the employer contribution rate.

By raising the contribution rate earlier than the funds were actually needed, effectively changing from a pay-as-you-go system to one accumulating a surplus during the Booomers’ peak earning years, there would be an excess “trust fund” to finance that generation’s retirement even if contributions declined due to lower birth rates.

In other words, the government made a contract with an entire generation of then-young workers that if they overpaid into the system in advance and agreed to put off retirement a little longer than preceding generations (justified by increased life expectancies), the government would in turn assure that Social Security benefits would be there when they retired. The excess contributions would accumulate in this trust fund through investment in U. S. Treasury securities.

If elected officials actually spoke the truth and had the country’s best interests at heart, the government would have begun building up a surplus, or rather paying down the national debt. Since the excess retirement funds had to be invested in instruments of the federal treasury, there should have been less need to borrow from other sources.

Alas, the twelve years of Reagan and Bush Senior gave the country larger budget deficits than had been built up over the previous two centuries combined. The Clinton years changed that direction, ultimately resulting in an annual surplus beginning in 1998 that ended with the George W. Bush tax cuts of 2001.

Still there is no need to worry. The excess funds in the Social Security account will total $3.7 trillion by 2018 and, unless the Republicans continue on their tax cut and spending spree to the point of bankrupting the country, the bonds held in trust can be cashed in as needed just like the savings bonds you’ve been buying for your children or grandchildren.

By the way, in case you’ve missed it elsewhere, according to Social Security’s forty-person actuarial team, 2018 is the projected date at which contributions will no longer exceed disbursements and the trust fund will need to be dipped in to. Even with no further adjustments to benefits, contributions or retirement age, that trust fund will not run out until 2042, and according to the conservative Congressional Budget Office, until 2052.

So there’s not really a problem at all. The President’s claim in his State of the Union speech that “the entire system will be bankrupt” is a bald-faced lie, scare-mongering demagoguery at its ugliest. Even after the trust fund accumulating today is exhausted in 37 or 47 years, the system will be able to pay out 75% of its promised benefits from current contributions at the time. With a tiny bit of tinkering---say raising the salary cap on which Social Security withholding is collected, which is now $90,000.00; or allowing the Bush tax cuts for the wealthy to quietly expire---and the system is solvent beyond the 75-year range for which predictions are made.

But---and this is the big but of all big buts---the new war on Social Security isn’t about Social Security or fiscal policy at all. Its purpose is to continue re-engineering America to fit into the radical right wing vision.

Back in 1934, President Franklin D. Roosevelt spoke of “security against the hazards and vicissitudes of life” and told Congress that “fear and worry based on unknown danger contribute to social unrest and economic demoralization.” In a fireside chat to the nation in June, 1934, he introduced the idea of “social insurance” by saying “it proposes, by means of old age pensions, to help those who have reached the age of retirement to give up their jobs and thus give to the younger generation greater opportunities for work and to give to all a feeling of security as they look toward old age.”

And that is what Social Security was intended to be---social insurance. Roosevelt noted that “as our Constitution tells us, our Federal Government was established, among other things, ‘to promote the general welfare,’ it is our plain duty to provide for that security upon which welfare depends.”

Note that FDR implied that there is a social compact among American citizens, a “greater good” that trumps unfettered individualism. In that same fireside chat, he said, “In the working out of a great national program which seeks the primary good of the greater number, it is true that the toes of some people are being stepped on and are going to be stepped on. But these toes belong to the comparative few who seek to retain or to gain position or riches or both by some short cut which is harmful to the greater good.”

This message that everyone in a society has a stake in the greater good of that society was ascendant for the next half century in American politics and governance. But in the 1960s, a new, at that time small, right wing minority cloaking themselves in the conservative mantle began chipping away at the societal bonds, aided unwittingly and ironically by the “do your own thing” creed of that decade’s young people. By the dawn of the Reagan era in 1981, the pendulum had swung so far in the opposite direction that appeals to selfishness and greed had openly replaced the notion of selfless service advocated just twenty years earlier by John F. Kennedy, “Ask not what your country can do for you; ask what you can do for your country.”

Here we are in 2005, and the philosophical descendants of that small minority are no longer on the fringes, they’re running the show. Their goal is nothing short of the emasculation of the federal government so that it is no longer “of the people, by the people and for the people.” They worship Ronald Reagan and his oft-repeated mantra that “government is not a solution to the problem, government is the problem.” Now that they ARE the government, they intend to turn this soundbite into a self-fulfilling prophecy.

If these guys have their way, there will be no restrictions on industry’s despoiling of the planet; there will be no regulatory agencies to assure that your food is safe or your medications have been effectively tested; your right to privacy will disappear; science will be dumbed down and politicized; public education will starve to death; the rich will get richer, the have-nots will have less, and the middle class will be squeezed even tighter. These things are already well underway. The destruction of the 70-year old social insurance policy in which every one of us has a stake is next.

So it is incumbent upon those of us whose attentions are not being diverted by the latest TV reality sideshow or bamboozled by appeals to our lesser selves, to get off our complacency and take action. We must make our voices heard. And we must realize that we are the true “silent majority,” people who actually care about others and about the best interests of our country and our world. We must become even more informed and more visible; we must participate fully in the public life of our communities; we must stand firm and resolute, and take back our country.

The future of the United States and its place in the world literally depends on us.

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