Privatizing Social Security to Boost Class Equity?
Seth Sandronsky
In his second term, President Bush continues to try and spend the "political
capital" that he claims to have earned by defeating Sen. John Kerry last
year. And who better to help the president than Alan Greenspan, chairman
of the Federal Reserve Bank? Officially, he now backs Bush's plan for
younger workers to invest, voluntarily, about two-thirds of their Social
Security payroll taxes in private accounts.
Consider one pundit's take on what the nation's top central banker said
about private accounts for Social Security. "This week, Mr. Greenspan
offered no excuse for supporting privatization," economist Paul Krugman
wrote in the Feb. 18 edition of the NY Times. Well, not quite. Greenspan
said privatizing Social Security would be a step towards more equity in U.S.
society. Presumably, the opportunity to invest in private accounts can help
working America narrow its widening income inequality with the upper class.
Concerning the creation of private accounts, Greenspan testified on
Wednesday to the Senate Banking Committee: "I've been concerned about the
concentration of income and wealth in this nation . and this, in my
judgment, is one way in which you can address this particular question." Is
his view of private accounts and class equity to be believed?
For that answer we first turn to the last decade. Greenspan's monetary
policies were widely credited for the rise of wealth spurred by financial
markets. The richest five percent of U.S. households saw their income grow
between 1990 and 2000. At the same time, the household income of the bottom
60 percent of U.S. households fell.
Why? One part of the answer is job insecurity, as commercial pacts such as
the North American Free Trade Agreement sucked high-paying factory work to
low-wage nations. Lower-paying service employment, typically nonunion,
replaced such employment in the U.S.
Earning wages is how the majority of Americans survive. When labor market
conditions favor employers, employees tend to moderate their demands for
higher pay. It is better to have a low-wage job than none at all under
capitalism.
Greenspan is well aware of that trend. In the 1990s, he "began to speak to
his colleagues within the Fed about the 'traumatized worker'-someone who
felt job insecurity in the changing economy and so was accepting smaller
wage increases" writes Michael Perelman, professor of economics at CSU,
Chico, in Manufacturing Discontent: The Trap of Individualism in a Corporate
Society (Pluto Press, 2005). Fear of being jobless-the starvation factor-is
a key issue for employees. For their employers, such fear can and does boost
profitability. In late January 1997 before the Senate Budget Committee,
Greenspan said: "As I see it, heightened job insecurity explains a
significant part of the restraint on compensation."
Greenspan has huge credibility on Wall Street and in Washington, DC. But
how will his comments on private accounts to preserve Social Security play
on Main St., as the president and Vice President Cheney say that the popular
program is not safe for future generations? Well, Bush's proposed plan is
losing steam, according to recent public opinion polls. That outcome is due
partially to the president's recent multi-state tour to try and sell his
Social Security privatization proposal to an increasingly critical and
skeptical American public. Clearly, the U.S. population is growing uneasy
about Bush's plan to revamp Social Security and thereby enhance workers'
golden years.
On that note, Greenspan's claim to be concerned about social equity is
questionable. Simply, his talk does not match his walk. His recent backing
of private Social Security accounts comes four years after supporting Bush's
tax cuts. They are mainly helping investors, not wage-earners.
When Wall St. pays less taxes, Main St. pays more taxes and/or gets cuts in
non-military (health, schools, etc.) spending. In sum, this describes
Bush's fiscal 2006 federal budget proposal. Meanwhile, real wages, what
working people can actually buy with their pay, declined in 2004. Main St.
is losing ground at work.
What of the increase in federal debt that creating voluntary private
accounts for Social Security would trigger? That debt trap would fall
mainly on the hard-working backs of Main St. On one hand, Greenspan has
noted the potential for federal debt expansion. On the other hand, he
sidestepped its impact on the working class. Instead, Greenspan warned
about the mood of markets, elected by nobody but having extreme political
power, on the future growth in federal debt.
He talks about helping Main St. but has helped Wall St. at the expense of
working America. What reason is there to think that Greenspan's devotion to
the upper class will improve social equity via Bush's plan to privatize
Social Security?
Seth Sandronsky is a member of Sacramento Area Peace Action and a co-editor with Because People Matter, Sacramento's progressive paper.
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