Social Security - From New Deal to No Deal (3/7/05)
by Dean Hartwell
Franklin Roosevelt proposed Social Security as a social insurance program. He wanted to make sure that, by taxing workers and paying the elderly, no one would live the last years of their life in poverty.
Social Security became one of the fixtures of the New Deal, a revolution born of the Great Depression. Now President George W. Bush threatens to dismantle it with his proposal to allow workers to withhold a part of the Social Security tax and invest it in the stock market.
This plan follows the Bush Administration’s disastrous policy on Medicare. There, his followers in Congress forbid the Department of Health and Human Services from bargaining with drug manufacturers to lower prices on drug prescriptions. They also outlawed the purchase of medication from Canada, where prices are substantially lower than in the United States.
I sense an ominous trend and I do not like it. The New Deal, and its successor, the Great Society, and with it their protection of the elderly and disabled, are clearly at stake.
For one thing, there is typically no guarantee on rates of return from any of the options Bush’s supporters mention as investments, like mutual funds, bonds and certificates of deposit. Greg Anrig, Jr. and Bernard Wasow of the Century Foundation point out that if this plan of privatization is used, “the government would need to establish and track many small accounts…many workers’ accounts would be so small that they would be of no interest to profit-making firms.” (“Twelve Reasons Why Privatizing Social Security Is a Bad Idea;” The Social Security Network; 12/14/04 at www.socsec.org/publications.asp?pubid=503#)
Robert Reich says that “once Social Security is ‘privatized,’ and elderly people are on their own to invest as best they can, what happens to those who made bad investments and lost their savings in the casino that’s known as the stock market?” (Reason: Why Liberals Will Win the Battle for America; Alfred A. Knopf; 2004, p. 114)
For another, there will be a huge transition cost to fund Social Security if a portion of Social Security taxes is put into private accounts. Some estimates place this transition cost as high as $2 trillion.
Yet another problem is that not everyone who receives Social Security is a retired worker. In fact, Anrig, Jr. and Wasow point out that a full 37 percent of beneficiaries are receiving either survivor’s or disability benefits. Funding for the worker’s privatization will come from a cut in payroll taxes, but where will the funding for these individuals come from?
But the biggest problem of all is that there is no crisis, despite what Bush has said. Anrig, Jr. and Wasow state that the Social Security system trustees’ latest estimates show that “Social Security will continue to be able to pay benefits in full until its trust funds are exhausted in the year 2042.” But the Congressional Budget Office reports that date is 2052 – and after that 80% of all benefits will be paid if there are no changes.
Of all of the problems we have in our society, Social Security simply doesn’t stack up in urgency to others. Over 40 million people in the United States have no health care insurance. Bush has set records for budget deficits and debt. The drug war continues to incarcerate people unfairly and deprive others of civil liberties. And so on.
Let’s keep the New Deal’s promise of security for the elderly, the survivors and the disabled. Let’s throw the privatization plan back to the Bush Administration and tell it to get a new set of priorities more befitting of our nation’s people.