In a previous column I described the intended purposes of the seventy-year-old Social Security system, and criticized the lavishly funded, ideologically and greed driven propaganda that willfully confuses the Social Security insurance program with the volatile, risky portion of an affluent investor’s portfolio. This column will highlight the nature of the crisis that threatens this vital program that insures almost all American workers and their families against consequences of loss of income when a worker dies, or becomes disabled or attains retirement age.
We have all been told and retold that Social Security is in crisis because payroll taxes will not be able to keep up with benefits payments, and the system will go bust. President Bush said recently, “By the time the baby-boomers like me get ready to retire, there’s not gonna be enough money in the system to pay for our benefits. So I’m saying, we’ve got to fix it now.” What he said in the first sentence is not true. And the proposals he has in the hopper cannot produce what he promises in the second sentence.
Social Security surpluses are held in U.S. Treasury Bonds, the most secure financial instrument in the world. The Trust Fund surplus is higher today than it has ever been, and will continue to increase for the next decade or two, becoming over triple the current amount if nothing is done to change the system. After that, according to very conservative productivity growth projections of the Trust Fund Trustees and, separately, the Congressional Budget Office, it will begin to decline, and the surplus is predicted to drop to zero about 35 to 50 years from now. By then, only a tiny remnant of the Baby Boom generation will still be alive.
Social Security revenues now cover all annual benefits, all administrative costs, which are less than one percent of total annual benefits, and the growing surplus. Outside of Social Security, federal revenues today only cover 2/3 of total government spending thanks to the record high deficits brought to us during the opening years of the 21st Century following the budget surpluses of the late 1990’s. If no corrective steps are taken, when and if the Social Security surplus drops to zero, 35 to 50 years from now, Social Security will still be in better financial shape than the rest of the U.S. Government is today. Social Security income will still be able to pay for at least 3/4 of full benefits.
Who could listen with a straight face to a talking head telling us that Social Security, operating with a surplus for 3 or 4 decades to come, is facing an imminent financial crisis and we must do something quick and drastic to correct it, while ignoring the huge federal budget deficits and the even worse trade deficits that are mortgaging the young and coming generations right now? How foolish do they think we are?
Privatizers argue the demographics that there are going to be too many old people and they will live too long. But demographics also show that while there will be more retirees, there will also be fewer children per worker, with the result that there will be fewer total non-working dependants per worker in the future than there are now.
Don’t mistake me. I’m not saying everything is perfect. We need to anticipate and make careful corrections before problems arise. But an imminent crisis that demands radical changes to an essential, tested and proven program? C’mon. Don’t be tearing the truck’s engine down and junking the chassis when all it needs is a set of plugs and an oil change … especially if you’re ignoring the tractor with the rod knocks and no brakes.
Okay, just for the sake of argument, let’s say I’m wrong. Pretend there is a real crisis that requires immediate, drastic action. What then will be the effects of the current proposals if they are actually implemented? I don’t have room in today’s column to address that vital question. But here are two clues as food for thought until next time.
1) If 2/3 of a worker’s payroll tax is diverted to privatized accounts, the Trust Fund surplus will begin falling now or very soon, and drop to zero in 10 to 20 years, instead of rising to over 6 trillion dollars and becoming zero in 35 to 50 years as it will with no changes. Privatization hastens by a quarter century the system insolvency forecast by the privatizers themselves. Think about it. You can’t reduce Social Security receipts by 33% while maintaining current benefits without making any fiscal problems drastically worse. Privatization will cause Social Security to have zero surplus in only a decade, plus or minus, and the national debt will increase by trillions of dollars.
2) Changing indexing (the way benefits are calculated for future retirees) may not seem compellingly interesting, but if the index change results in a ‘minor’ reduction of 2% in yearly benefit calculation, the cumulative effect is that a person retiring in 2040 will receive a monthly benefit amount that is half what she would otherwise have received. The longer it is before you retire, the younger you are, the more this will adversely affect you. If you think that current Social Security benefits are twice as much as you or your spouse or your children might need, then changing the indexing formula could be just right for you and for them … and for the President. But be assured, the President depends not at all on Social Security for his family’s security.
The ‘President’s Commission to Strengthen Social Security’ is about as cleverly and ironically named as the ‘Healthy Forests’ initiative that dramatically increased clear-cut logging of old-growth forests, and the ‘Clear Skies’ initiative that increased permissible emissions of toxins to the atmosphere, and no better targeted than the pre-emptive rush to War to destroy Iraq’s non-existent ‘Weapons of Mass Destruction’.
We have to ask questions when Social Security, the most successful, efficient, beneficial and fiscally sound federal program ever, is characterized as being in dire ‘crisis’, and the proposed ‘fix’ will simultaneously cripple the program’s original insurance purposes, and immediately worsen and hasten the projected fiscal dilemma. We have to ask whether this President is the right one to ‘fix’ Social Security, when his Administration were the architects of the most precipitous fiduciary drop off a cliff ever, transiting from back-to-back budget surpluses to a record deficit in one year, employing the outrageous idea of huge tax cuts during wartime for the richest of the rich.
I don’t believe for a minute that the President and his advisors and allies in Congress and his Wall Street financial backers are stupid or ignorant. Their intent is most clearly revealed by comprehending the effect of the attacks and the proposals. The effect is to destroy the Old Age, Survivors, and Disability Insurance Program that was a dream long deferred, the fruit of a long hard-fought struggle against very rich and powerful and uncaring interests. It is the fruit of a struggle by honored generations now passed-on who left Social Security as their loving legacy to all of us now living and all yet to follow. And now, seventy years later, we have to struggle again if we mean to keep it and to pass it on undiminished to generations who succeed us.
January 27, 2005 (See “The Piratical Heirs of Ebenezer”, part 1 of 2)