Hey Wall Street! Hands off our Social Security

Hey Wall Street! Hands off our Social Security
Jenny Brown
February 1999

In a sickening threat to our financial well being, Wall Street financiers are eyeing America's most successful universal program, hoping it will be their next big cash cow. Social Security is not only an inflation-proof and secure retirement program (most of us rely on it-many of us have no other pension), but it is also disability insurance and financially supports children if their parents die. Unlike private pension schemes, the employer has to put up half the money from the day you start work, and your retirement won't disappear if the company goes bankrupt or if you change jobs.

First, a note to young people don't think this has anything to do with them: Retirement may be a long way off, but we sometimes forget the effect Social Security has in our lives right now. For example, what's paying for grandma and grandpa's grocery bills and rent right now? How about mom & dad when they retire? Did you ever think they might have to move in with you? Do you want to be able to change jobs and not worry if you'll have a pension? Most pensions (for example, at the University of Florida) don't kick in until you've worked at one job for ten years or more.

Social Security isn't a personal account the government keeps, where you put money in and then when you retire you draw it out. Instead, each generation of workers supports the current generation of retirees-which we would be doing anyway as individuals, except we're all doing it together so it spreads the responsibility and makes it fairer. Social Security means that when you retire, you are not simply dependent on your family. Before Social Security millions of older people were left destitute after a life of work, and all but the rich had to fear the day they would no longer be able to work.

Scare tactics
Social Security is in trouble, we are told, because the large baby boom generation is going to retire and this will increase the amount paid out compared to the money coming in from current workers. Yet the numbers don't support these claims.

"The truth is," says the Labor Party, a recently-founded working people's party,"There is no crisis in Social Security funding. If Congress does absolutely nothing, Social Security can meet all of its obligations to provide benefits for retirees, survivors, people who become disabled, and the families who rely on them for the next 33 years."

So who is telling us this and why? Wall Street big money interests look at Social Security and they see potential to make $240 billion dollars in fees to banking and investment firms in the next 12 years by diverting Social Security taxes into individual private investment accounts. The Labor Party points out, "This $240 billion in fees contrasts with the current administrative costs for Social Security which are about one percent of benefits. According to the American Council of Life Insurance, administrative costs for private insurance are between 12 and 14 percent of annual benefit amounts."

Right-wing pundits endlessly fret that the public sector is so wasteful. What they're really thinking-but can't say-is that the big corporations can't stand the competition from the public sector. The public sector is cheaper because no-one's skimming profits off the top. Ninety-nine percent of what we pay into Social Security is going back out in the form of checks to our elders. No private industry would settle for 1% profits & administrative costs.

Stock market lottery
So what are these big money mouthpieces suggesting? "Up until the stock market's nose dive in September, privatization proponents tried to sell working families on individual accounts, boasting about the recent stock performance," reports the Labor Party. "As millions of investors received their third quarter stock performance results in October, they learned a painful lesson, that what goes up will eventually go down. With individual accounts, the savings of a lifetime can rapidly evaporate; just when you need it most at retirement."

According to Dollars & Sense magazine, by one estimate, "A worker who retires after 35 years faces a one-in-four chance that she will have only 25% as much money in the bank as she had anticipated." (Nov./Dec. 1998)

Insurance company bonanza
Big money would also benefit from our need to protect our families in times of disaster. Imagine the bonanza private insurance companies will have if the disability and death benefits are cut from Social Security. You can almost see the dollar signs lighting up in their eyes, and they contemplate selling life insurance and disability insurance to millions of Americans who now have no safety net at all in case of catastrophe.

Raiding the trust fund
To add more insult to these lies, Social Security has actually been running a surplus, collecting more money than it's paying out. When the government was running such high deficits in the '80's, they raided Social Security to pay for other government priorities, according to Donald Bartlett and James Steele, Pulitzer Prize-winning Philadelphia Inquirer reporters. In their 1992 book, America, What Went Wrong? they report: "Congress and the president took the...surplus in trust funds-money that was to have been set aside for future Social Security payments-and spent it instead for other government programs, thereby masking the true size of the deficit."

"By law" Bartlett & Steele state, "money in a trust fund may be spent only for the specific purpose for which the trust fund was created. Unless you happen to be Congress or the president. In which case you may remove $138 billion from Social Security and other trust funds--which Congress and two presidents did through the 1980's--and divert the money elsewhere."

President Clinton's suggestion is to take some of the Social Security Trust Fund money from U.S. government bonds, where it is now, and invest it in the stock market. This makes the big financiers nervous because they worry the government (and thus maybe even the people) will have more say in how private corporations are run. Wall Street would much rather separate our money into individual accounts, either gradually undermining or suddenly slashing the public system. They would replace it with a private one where each person is forced to fend for themselves and compete with their neighbors for.investment returns. Of course, everyone would be forced to pay Wall Street brokerage firms for the privilege of watching their savings go up and down like a rollercoaster.

The Privatizers platform
The privatizers' suggestions include:

End any guarantee of a benefit by investing all or part of your Social Security taxes in the stock market in individual accounts. This means that not only are you at risk for ending up with very little, you have to worry you might outlive your savings, something you never have to worry about with Social Security.
Private accounts would have no guaranteed cost of living adjustments, and no public accountability.
Eliminate the guarantees of disability and death benefits. "A private system, in which each person is responsible for their own retirement savings, would reduce or eliminate this insurance," according to Dollars & Sense.
Cut taxes on the well-to-do. This would be done using the phony "surplus" they stole from the Social Security Trust Fund.

The Democratic "alternative"

Clinton, declaring a budget "surplus," has vowed repeatedly to "save Social Security first." That's better than the Republican cry of "lower taxes (on the rich)" but it rings hollow when you discover that the surplus came from our Social Security payments in the first place. The more 'moderate' Democratic suggestions to "save Social Security" include:
Raise the retirement age higher and faster. It's already slated to rise from 65 to 67 by 2027. Not content to steal our money, now they want to steal our meager years of relaxation. For workers in many industries, working past 62 is simply not an option because of the wear and tear on the body that results from decades of demanding work. These workers, if they retire at 62, already end up with reduced benefits. Many countries have lower retirement ages and this should be our goal.
Cutting Cost of Living Allowances (the increases in benefits that keep up with inflation.) We already know that Social Security alone is not enough to live on for many retired people.
Raise Social Security taxes. In combination with privatization, this will just make the bankers richer. Without privatization, it might be a valid way to increase benefits for retirees.

A people's fix
Instead, the Labor Party, the Gray Panthers, the National Council of Senior Citizens and many others suggest raising or eliminating the "earnings cap." People who make more than $68,400 a year (about 5% of Americans) don't pay any Social Security on earnings over that amount. Thus, Bill Gates pays the same Social Security tax as someone who makes $68,400. Eliminating this cap would bring a lot of money into the system, contributed by the 6% of Americans who make over $68,400 a year and their employers.

The Labor Party also points out that raising wages for workers will increase the amount of money going into the system. Their proposal to guarantee everyone a job at a living wage (they figure the minimum wage should be $10 an hour) "would go a long way in producing the needed funding to keep Social Security solvent in the foreseeable future."

If you want to find out what your estimated Social Security benefits are, call the Social Security Administration at 1-800-772-1213 and request a form. You can also check your earnings record over the years-they do make mistakes and it's important to correct them while you still have your earnings records.

The Labor Party is a political party for working people founded in 1996 by trade unionists who got tired of both the Democratic and Republican parties serving the needs of big business while ignoring the needs of the people. To join (you'll receive their bimonthly newspaper, too) send $20 ($10 retired / unemployed / low income) to Labor Party, P.O. Box 53177, Washington, DC 20009. Info: 202 234-5190.

The Gray Panthers have arranged a number of Teach-Ins on saving Social Security First from Privatization. They want to "Lift the Tax Cap," making the upper 5% pay their fair share of Social Security taxes. You can join the Gray Panthers by writing Gray Panthers, 733 15th Street NW, Suite 437, Washington, DC 20005.

To subscribe to Dollars & Sense magazine, send $18.95 to Dollars & Sense, 1 Summer St., Somerville, MA 02143. The quotes are from Christian Weller's article "Six Reasons Why Privatizing Social Security is Insane."

Did you know ... that the University of Florida paid Steve Forbes $36,000 to speak at UF? Forbes is worth between $400 and $500 million.