KUFM / KGPR
T. M. Power
Manufacturing a Social Security Crisis
The anti-government ideologues surrounding President Bush are poised to launch an all out attack on the most successful program the federal government has ever run, namely, Social Security. That program, begun in the depths of the Great Depression 70 years ago was largely responsible for reducing the poverty rate among the elderly from more than 35 percent in the 1950s to about 10 percent today. Although most of us would not want to try living on Social Security alone, it does provide a solid safety net for all of our seniors, rich, poor, or middle class. It does so at a phenomenally low administrative cost of about one percent of its revenues.
The Bush ideologues hate that program and its success because the government is so centrally involved in it. They correctly realize that its success clearly demonstrates that there are some things the government can do well, at low cost. That, to the ideologues, is a subversive socialist idea.
They want to move the money supporting social security out of government hands and into Wall Street brokers’ hands. Wall Street, of course, is slobbering over the thought of all of the additional business it would get and all of the additional fees it will be able to charge if each and every one of us has to use an investment broker regularly to manage our Social Security accounts. The financial geniuses who brought us the bankruptcies of Enron and WorldCom and the Dot Com bust can’t wait to work their magic and pad their fortunes playing with what are now Social Security funds.
But before these
ideologues can turn these trillions of Social Security dollars over to Wall
Street speculators, they have to first convince us that the Social Security
system is broken and in a crisis so serious that only radical surgery can save our
retirement income. They have been
beating the Social Security “crisis” drum for a long time, slowly hypnotizing
the public and press into believing it.
It is the same “big lie” type of campaign that the Bush Administration
used so effectively in justifying the invasion of
There are two central pieces to the Social Security “big lie” strategy.
First we are told that the Social Security fund is on the verge of running out of money and won’t be able to meet its promises to future retirees. That simply is not the case. The most recent projections by the trustees of the Social Security system indicate that the fund will remain solvent for almost fifty years into the future. Each year, recently, the trustees have moved the problem years out into the more distant future, not closer to the present. The Social Security system has been getting more solvent recently as the years have passed, not closer to crisis.
Equally important,
even that projected problem fifty years from now is tied to conservative
guesses about how the economy will perform between now and then. The trustees assume that the economy will
perform more poorly than it has over the last 50 years and much more poorly
than it has over the last fifteen years. The trustees also assume that
immigration into the
The second part of the big lie is that if Social Security is privatized we each, individually, can invest in the stock market and make a lot more money that the Social Security trust fund does because it is invested in federal government bonds. We are told that our private investment earnings will be much higher and we will retire with a lot more money.
This is a something-for-nothing fantasy. As any investment counselor or economist will tell you, the higher return on investments in the stock market is not a gift but compensation for the much higher risk the investor is taking on. The return is higher because the return is not guaranteed and may turn out to be zero or a loss rather than a gain at all. Having just lived through a stock market bust in which many people lost most of their savings rather raking in high returns, it is clear that this is not just a theoretical concern. For those who retire during a downturn in the stock market or those who invest in the equivalent of the next dot com bubble, there may be few or no retirement dollars left. In addition, the broker fees that private investors have to pay will eat substantially into whatever returns there are. The experiences of England’s and Chile’s privatized pension schemes indicate that when many retirees find their private investments have failed, the government will have to step in and set up again the Social Security safety net they originally had but abandoned. That too will be costly.
The talk about
privatizing our retirement planning should shift away from killing Social
Security and stay focused on the supplemental retirement investments on which
almost all middle and upper-middle income families are already focused. We can and
are privately supplement Social Security while leaving in place a solid,
successful, and substantial safety net.
We need to firmly reject this new “big lie” campaign.