Saving Social Security?

- Seth Sandronsky Officially, the people of Iraq are being “saved” with bombs and bullets by the Bush White House. Meanwhile, the administration is pressing forward to “save” the Social Security system for Main Street America. Presumably, introducing personal savings accounts will preserve this program of social insurance for retirements, survivors' benefits and disabling injuries.

To that end, a coalition of the two political parties will be needed, readers learned in a Dec. 4 column by David Brooks in the NY Times. For him, this two-party coalition, including GOP Senator Lindsey Graham of South Carolina, must learn to get past political differences to reform Social Security for Main Street, and not to swell the pocketbooks of the nation’s upper class. Its drive to slowly privatize Social Security is less newsworthy than pro athletes such as Barry Bonds, Jason Giambi and Marion Jones using steroids to “be all that they can be” in the corporate world of modern sports. Crucially, those who question Brooks’ desideratum on Social Security are “special interests” who fail to grasp the reality of the system’s financial fragility.

Still, Brooks lacks the “scientific” credibility of a mainstream economist concerning the future solvency of Social Security. For that, we can turn to N. Gregory Mankiw, chief of the Council of Economic Advisers for President Bush. Taxes should not be raised to cover the system’s funding shortfall in 2042, Mankiw said on Dec. 2. It is of no consequence that taxes have been increased to bridge such gaps for Social Security between the 1950s to the 1980s.

Such history is down the memory hole. And pundits like Brooks are well-trained not to mention that. Likewise, he is mum on the CFA’s forecast in July 2003 that the Bush income-tax cuts for the wealthy would create 5.5 million new jobs by the end of December 2004. The reality is short of this figure by about 3 million new jobs for the 17-month period.

Meanwhile, what passes for information from a top economist for the president is supposed to empower the mass of the American people to make rational decisions on Social Security. Then, as isolated individuals investing in personal savings accounts, they will reap all that the stock market has to offer them. Such investments will replace, in part, the current system of social insurance that is lumbering, clumsily, towards a sea of red ink. Nobody in their right mind wants that.

It is far better to act now and avoid that future pain. After all, private is good, and public is bad. This theme is a favorite one of the GOP and the Cato Institute, taking the “hard line” versus the “soft line” of the Democratic Party and the Brookings Institute. For Brooks, Mankiw and the Republican Party, now is the time to get a move on with the program to save Social Security for the baby boom generation.

On that note, backers of privatizing Social Security claim that Americans can expect to earn higher rates of returns than are now being paid out. This future scenario will be the case, of course, once Uncle Sam borrows a trillion dollars or more to finance the establishment of the private savings accounts. Economist Dean Baker notes that under Bush’s proposed plan for Social Security, there will be benefit cuts of nearly $100,000 for a 20-year-old over the course of her retirement . Nevertheless, to financial markets Main Street must go.

Invest, invest, that is Moses to the prophets! But invest in what is the question. Currently, there are trillions of dollars invested in financial markets that are unconnected to the useful production of what regular people use to live. In brief, this process attracts surplus capital to financial markets.

And the more capital they attract, the more of it there is to contribute to Democrats and Republicans to help Wall Street fleece the populace. This process is the driving force to slowly privatize Social Security. Hitching it to financial markets for the purpose of preservation is a little like promoting sex as a way to become a virgin. Speaking of preservation, recall the stock market inflation of the 1990s? It partly funded retirement benefits for government and private-sector employees in the U.S. Many of their employers bore these pension costs. These are called defined benefit plans.

Then the stock market soured. Employers began to flee their investments in workers’ retirements. They began to bear market risk for pensions. As a result, employees had to invest in what are called defined contribution plans.

Tens of millions of workers, not their employers, now bear the risk and reward for retirement based on how financial markets rise and fall. Nobody can predict what they will do. There are simply too many actors involved in millions of transactions for predictions to be much more than speculations. To somewhat paraphrase the late American author Flannery O’Connor, all that rises in financial markets must eventually converge on future uncertainty.

That much is certain. Certainly, Social Security provides stability for America’s working majority. Social Security funds invested in government bonds are stable as long as the U.S. government exists. Social Security has never missed a payment to retirees, survivors or those disabled and away from work.

Social Security is stable also because it spreads risk just like Allstate, State Farm and other insurance companies. Hitching the system to the “irrational exuberance” of financial markets is a recipe for instability. In contrast, social prosperity requires stability. Social Security has done and will continue to do just that if the privatizers fail.

Here lies the main contradiction between the needs of Wall Street and Main Street. Here is a current example of the conflict between capital and labor, underway for centuries. U.S. wars on Iraqis by sanctions and munitions are both diversions from and complementary actions to the upper-class agenda of destroying the material stability of America’s working majority. Awaken, Main Street. Beat back the attack on Social Security.

Seth Sandronsky, a member of Sacramento Area Peace Action and a co-editor with Because People Matter, Sacramento’s progressive paper. He can be reached at: ssandron@hotmail.com.