- Say you're expecting to rely on a modest retirement fund.
Along comes a hotshot stockbroker promising that if he can handle your
money, he'll guarantee you 15 or 40 percent less of a payout than you would
have gotten in the first place.
-
- It sounds absurd--but that's the essence of George W.
Bush's Social Security "reform." For all of Bush's hype about
diverting a portion of the Social Security payroll tax into individual
retirement accounts, his proposal is simply a smokescreen for a cut in
benefits.
-
- The White House signaled as much in early January, when
it began promoting a plan to calculate future Social benefits based on
inflation rather than wages. That may appear to be fair--at first. If benefits
climb along with prices, won't future retirees keep ahead of the curve?
-
- No. The current formula for benefits is calculated according
to a percentage of wages earned over a workers' lifetime. Low-income workers
receive benefits based on a higher percentage of their wages when they
retire, helping them to avoid poverty. Better-paid workers, who often have
other sources of retirement income, get benefits based on a smaller percentage
of their wages.
-
- By using inflation rather than wages to calculate Social
Security benefits, the Bush plan would exclude retirees from increases
in overall standards of living based on wage increases. All told, say economists
Dean Baker and David Rosnick, "A 15-year-old who is just entering
the work force can expect a benefit cut of close to 40 percent"--nearly
$160,000 in benefits in all.
-
- Not to worry, says the White House. Individual retirement
accounts invested in the stock market will make up the difference--and
workers will have the benefit of "ownership," too.
-
- Wrong on both counts. First, the White House assumptions
of an ever-rising stock market is ridiculous, as a look at the burst of
the Wall Street bubble in 2000 makes clear.
-
- "The stock market's historical returns (some 7 percent
a year) are predicated on a hypothetical investor who bought an array of
stocks in the past, reinvested all dividends, never cashed in, and never
paid commissions or fees," the Black Chronicle newspaper noted in
an editorial. "Well, that is not how investing works in the real world."
-
- In fact, real-world Wall Street is poised to siphon off
billions in management fees to administer the new retirement accounts.
Subtract that, wrote economist and New York Times columnist Paul Krugman,
and a reasonable expectation of a return on such accounts is more like
4 percent. That's comparable to the low-risk Treasury bonds that Social
Security trust funds hold today--only they won't come close to compensating
for the proposed cuts in benefits.
-
- Slashing benefits, of course, is Bush's real aim. And
given that people won't really have access to the money in individual retirement
accounts, they'd have the risks of playing the stock market without the
chance to strike it rich. "These private accounts, then, are more
what Business Week calls a 'values issue' than a fiscal one," admitted
the conservative economist Irwin Stelzer, an adviser to right-wing media
baron Rupert Murdoch.
-
- If working people reject the hype about personal accounts,
the Bush crowd will sound the alarm--once again--about the "crisis"
in Social Security. The message boils down to this: The system is on the
brink of collapse because of the impending retirement of the baby boom
generation, and if you don't do go along with privatization, you'll get
nothing at all.
-
- In fact, Social Security, the most successful social
program in U.S. history, is on strong footing. That's precisely because
it isn't based on individual retirement accounts, but rather relies on
workers to pay taxes to support today's retirees, with the expectation
that those workers will receive similar support in the future.
-
- The system, which currently relies on the interest paid
on treasury bills, can keep paying full benefits by cashing in bonds until
at least 2052, according to the Congressional Budget Office. And while
the White House claims that the current program will worsen the federal
budget deficit, the Social Security system is actually in surplus right
now.
-
- By contrast, Bush's plan would worsen the deficit by
having the government borrow up to $2 trillion over the next decade to
cover benefits for current retirees and those to come in the next few years.
-
- The simple truth is that Social Security benefits for
soon-to-retire baby boomers could easily be paid, and even increased--by
raising payroll taxes on high-income earners, who currently pay only on
their first $87,900 of income each year.
-
- But higher taxes on the wealthy is dismissed out of hand
by the White House and the compliant mainstream media. Instead, we're bombarded
with crisis scenarios that assume historically low rates of economic growth.
-
- So Bush's advisers assume a weak and stagnant economy
to predict doom for the current Social Security system--but promise an
economic utopia of ever-rising stock values in order to sell the privatization
scheme.
-
- This con job should be easy for the opposition in Congress
to expose--if one existed. The highest-profile criticisms of Bush's plan
so far have come from Republicans, not Democrats--who can't seem to fathom
that their promises to "save" Social Security mean they will
actually have to fight back. Instead, prominent Democrats are looking for
ways to "improve" Bush's proposed legislation--like they did
with Bush's disastrous No Child Left Behind and Medicare "reform"
bills.
-
- Social Security is an issue that can galvanize mass opposition
to Bush. It's time to get organized.
-
- - Lee Sustar is a regular contributor to CounterPunch
and the Socialist Worker. He can be reached at: lsustar@ameritech.net
-
- http://counterpunch.org/sustar01142005.html
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