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The Coming Attack on Social Security

category_bug_politics.gif In his first address to Congress this evening, President Obama will explain his economic policies and legislative agenda. He may or may not discuss Social Security – there is some argument within and without his administration on whether that program is too much to take on at the same time as the housing, credit, banking, auto, unemployment, health care and other crises.

Nevertheless, an assault on Social Security is planned and you need to know about it. Today's post will give you some context if the president does mention Social Security tonight and prepare you for what's ahead.

Back in 2004, when President Bush tried strenuously to privatize Social Security, I wrote a long series of posts tracing the history of the program and its remarkable success over 70 years, refuting every point of Bush’s disingenuous sales pitch. If you remember, it was his brilliant idea to allow workers to invest about half their Social Security contributions on Wall Street. It doesn’t take any imagination to know where those investments would be today if he had succeeded.

President Bush is gone now, but his fellow travelers have not given up their goal of looting Social Security and even eliminating it altogether. The low-level rumblings about Social Security that could be heard during the debate on the stimulus package are now being revved up for a full-bore attack in what journalist William Greider calls a “fiendishly clever grand bargain.”

“…an impressive armada is lined up to push the idea,” he writes, “Washington’s leading think tanks, the prestige media, tax-exempt foundations, skillful propagandists posing as economic experts and a self-righteous billionaire spending his fortune to save the nation from the elderly.”
- The Nation, 11 February 2009

[A reading of Greider’s easily digested full story will give you a clear and detailed understanding of the forces aligned against Social Security.]

That billionaire is 82-year-old Peter Peterson who made his personal fortune working at the shadowy Blackstone Group and he has undertaken a media blitz to hoodwink the country into accepting his devious plan to impoverish retirees.

The plan, in its simplest explanation, is to use the $2.5 trillion Social Security Trust Fund surplus to recover the money spent to bail out the banks. The result, obviously, would be to drastically reduce future retirees' (our children and grandchildren who will be old one day) benefits.

“Since the early 1980s, Peter G. Peterson has been warning that future entitlement deficits would crash the economy,” writes Robert Kuttner. “Yet when the crash came, the cause was not deficits but wild speculation on Wall Street.”
- The Washington Post, 23 February 2009

Complicating the public discussion of “Social Security reform,” which you will be hearing a lot about in coming months, are those ill-informed journalists who routinely reference the program’s “looming financial shortfall” as The New York Times blithely assumed in a political story last Sunday with no source or explanation. This morning, in a story about its latest public opinion poll, The Washington Post refers to the "runaway" costs of Social Security also without source or explanation.

Let us be clear: Social Security faces no imminent crisis. Nor is it “broke” as President Bush tried to make us believe. That $2.5 trillion surplus, confirmed by Social Security’s trustees in 2008, will continue to grow for few more years. There is no danger to benefits until 2041 when only 78 percent of obligations can be met. But that can easily be fixed, especially if we start now, with only minor changes to the program.

Among the better proposals that emerged during Bush’s privatization campaign are gradually raising the age at which full benefits are paid and eliminating or raising the salary cap on which the Social Security payroll deduction is imposed - currently at $107,000 annual income. These are both feasible moves that would ensure Social Security for years beyond 2041. The latter, of course, is opposed by fiscal conservatives - Peter Peterson, et al.

While it is true that the Trust Fund monies have been borrowed by presidents going back at least to Ronald Reagan for other purposes, the treasury bill IOUs sitting there in place of the dollars are legally binding obligations (with interest) of the government.

During the presidential campaign, Barack Obama indicated support for raising the income level on which FICA deductions are calculated, but the pressure on him from Peter Peterson’s group, Republicans and blue-dog Democrats to take the steps that would, in time, dismantle Social Security will be enormous.

Kuttner, in his Washington Post story, makes an interesting point in regard to the charge from these forces that in an era of deficit spending, the United States can no longer afford Social Security (and Medicare and Medicaid, but that’s a story for another day):

“History provides a parallel. At the end of World War II, the public debt was about 120 percent of GDP – about three times today’s ratio. Yet the heavily indebted wartime economy stimulated a quarter-century postwar boom – because all that debt went to recapitalize American industry, advance science and technology, retrain our unemployed and put them to work.

“We need to increase public spending and debt now to restore economic growth and then gradually reduce the debt ratio once recovery comes.”

Greider, in his story, has this to say about turning back the latest attack on Social Security:

“The Social Security fight could become a defining test for ‘new politics’ in the Obama era. Will Americans at large step up and make themselves heard, not to attack Obama but to protect his presidency from the political forces aligned with Wall Street interests?

“This fight can be won if people everywhere raise a mighty din - hands off our Social Security money! – and do it now, before the deal gains momentum. Popular outrage can overwhelm the insiders and put members of Congress on notice: a vote to gut Social Security will kill your career.

“By organizing and agitating, people blocked Bush's attempt to privatize Social Security. Imagine if he had succeeded - their retirement money would have disappeared in the collapsing stock market.”

That’s you and me Greider is addressing. We – elder Americans – defeated Bush’s privatization bid and we can do it again. You know how. You can write your Congress people here and here.

Often, postal mail can be more effective than email. You can find correct addresses at this website which also links to email pages for members of Congress. We need to do this, and do it repeatedly, not for ourselves – our benefits are probably safe - but for our children and grandchildren.

I urge you to read William Greider’s entire story. It covers much more than I have in today’s post and will give you a thorough grounding in the entitlement fight that is already underway. It also includes a link to Peter Peterson’s response to Greider.

[At The Elder Storytelling Place today, Susan Gulliford brings up the forgotten world of Metal Band-Aid Boxes and Dime Phone Calls.]

Comments

In Canada, we faced the issue of "dwindling" Social Security funds in the '90s, and a similarly drastic change was proposed and almost accepted. But thanks to the agitation and opposition of elders, only minor changes were made (increases in employee and employer payments into the fund) and our Social Security fund has been a non-issue ever since. No one even notices the increased premiums today, and there is no talk at all about dwindling.

What I learned from it all was not to under-estimate the political power of elders when they're pissed. Excuse me, threatened.

Thanks for the head's up Ronni. We need to be wary of the language and how it is used.

English is wonderful allowing such creative uses making motherhood and apple pie out of what really is a pig in a poke.

Another point, if I may Ronni…..

I would suggest we elders keep a close eye on the AARP organization with regard to this issue. Given the fact that they have such a strong lobby in Washington, they are a force to some degree to be reckoned with. The unfortunate thing about that is, given my distain for the current AARP organization which seems to be shared by others who frequent your blog, they no longer seem to pursue issues and debate in the best interest of we elders. The powers to be within the organization seem to be running it a bit like the Wall Street firms and banks are being run – solely for financial gain. If I didn’t know better I would swear AARP has a CEO and stock holders.

But aside from my brief outburst of sarcasm, I do think we should keep a close eye on their positions and respond to that organization likewise.

Ronni - it seems as though Social Security has been a target of "those" who view it as a redistribution of "wealth" from those that work to those that don't.

Rational people know this is not the case and is it less of an entitlement and more of a earned benefit that we contribute to throughout our working days.

But it does worry me that so many are lined up against continuing it. What plan do those that want to get rid of Social Security offer up as a safety net, if they are successful? Nothing that will work as well from what I have read,

So the battle will rage on again and the top 5-10% of income earners will attempt put their stamp on what is probably the most important and successful government program we have. a notch in somebody's belt.

Not something I am looking forward to.

Harold

We need an elder's march on Washington. I'd go.

Thanks for the "heads up". I mistakenly thought with Obama in charge this would be a non-issue. I'll contact my senators and representatives today.

This is the issue on which folks like us hit the barricades. And we need to make sure we take everyone we know with us: younger folks too have a huge stake in this.

The present economic crisis is more and more marked by cascading failures of confidence in the future of economic activity. What's that mean? Neither businesses nor individuals spend because they are afraid that survival requires hunkering down and hoarding instead. That's why we needed the Stimulus.

And when folks don't dare spend, the economy freezes up.

And that's why the last thing this economy needs is for the enormous Boomer cohort which is verging on receiving Social Security to be scared out of their wits -- and out of rational spending. Attacking people's trust that we'll somehow pull out of this nosedrive is a sure way to make the economic morass get worse.

Time to raise heck with polticians!

I'd just settle for an accurate audit of where the money has disappeared over the years from the Social Security program.

From reading 'legalise', government 'oversight' reports and so forth, it appears that whenever a 'tidbit' was needed to support some pork-bellied program or 'support' a lobbists agenda, eyes would light up and Social Security was tapped for the funds.

Since I'm in this deep, might as well go for the gusto: Why are people who have put nothing into Social Security allowed to receive it? I'm not talking about stay-at-home spouses, surviving children, widows or widowers of those working men and women who have contributed into the system.

I'm looking at those who wander to the US as if it's their own private gravy train, from the cradle to the grave - costs them nothing, expecting to not do anything except hold out a palm.

Ok, I'm sounding like Crabby here. But it's something to think about.

Georgjina

I'll be "crabby" with you. Its fine to have those rose colored glasses and want to "take care" of everyone who is "needy".

Those glasses need to be removed occasionally to see the able-bodied or those that "play the system" who find their way into that needy line with their hand out. (again and again). Think those kind are few and far between? Think again.

My mom and dad count on SS, I don't want to see it go down in flames. It might be nice to have it around when I retire as well.

We aren't counting on it.

Why am I not surprised?

First, corporations looted then abolished defined retirement plans. My mother, in her 80s, has three pensions and lives nicely. Even though my family never rose above blue collar and I have a Ph.D., she has to help me out -- at a time in life when I should be taking care of her.

Second, I was told to save my money in IRAs, 401Ks, 403Bs and the like. Investment was going to pay me far more than those stodgy old pensions, I was assured. Now, these have dwindled to half what they were a year ago.

I wish I had gotten that facelift I wanted when those funds were plump. At least I'd have something to show for my hard work and thrift. Maybe I'd even look youthful enough to overcome some ageist employment discrimination and get a full-time job. I work two or three part-time jobs. And three part-time jobs do not add up to the income and bennies of one one full-time job. They do, however, provide me seven days a week of work and keep me exhausted.

Third, I was sold the American dream of home ownership. I am in an upside-down mortgage; I would lose $25K to walk away. And I would wreck my credit rating. Oh yes, I have spoken with an attorney about it, trying to find a way out. Since I pay my mortgage, I don't qualify for any of Washington's bailout money.

Meanwhile, as I struggle to make ends meet, my tax money pays for the big bonuses of the folks at AIG -- you know, the ones who were managing my 403b for me.

I'm not surprised that the money I have paid into Social Security for the past 44 years will not be there when my turn comes. My turn has already been postponed longer than I was told when I signed up for my card for my first job at age 16.

My biggest decision seems to be: Should I move into a cardboard box under the overpass now or later?

I feel badly about sounding so bitter. But I am Fuming in Florida.

I'm so glad you keep us posted about this sort of s**t, but boy does this kind of thing rankle me!

The personal accounts were only proposed for people under 50. It had absolutely nothing to do with senior citizens.

For those of us that would be effected, it was a plan that would prevent the necessity of almost doubling payroll taxes (which are 15.3% when you include the employer half, which is part of the cost of employing you).

Assuming a worker works from 22 to 67, they have 45 years to save in their personal account. 45 years ago, in 1965, the Dow Jones was at 910 and the NASDAQ didn't exist. Now the Dow Jones is at 10,500 and the NASDAQ is at 2,300.

So stopping Social Security reform prevented the rest of us from realizing about a tenfold increase in our Social Security returns in the future. Instead, we will get a crushing gigantic tax increase combined with cuts in Social Security.

Or do you think trillion dollar deficits as far as the eye can see along with the baby boom generation retiring is sustainable?

Since the "Social Security trust fund" is nothing but IOUs from the federal government to itself, this system will be bankrupt by 2012 and getting worse every year the baby boomers retire.

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