Saturday, March 26, 2005

Column 22a - (National) Social Security

Cui Bono?

The President has stated his clear determination to dismantle Social Security as we know it, and Ifind myself asking the ancient Roman’s question, cui bono? Who benefits?

This administration has a track record of manufacturing crises to justify doing what it wants, and is incredibly good at selling these crises to its followers,who seem to believe what the President says first, and then to ignore him when he recants. Now we have the supposed crisis in Social Security, which the administration has already backed off on, but which its supporters continue to cite as dire necessity to tear down the house that FDR built.

There is no crisis, unless you call a shift in the ratio of input to output that will begin some 37 years from now a crisis. My dictionary defines crisis as “an unstable or crucial time or state of affairs in which a decisive change is impending,” and defines impending as “to hover threateningly; to be about to occur.” Almost four decades does not qualify as “about to occur”.

While there is no crisis, there is a problem coming in the above time frame. Social Security, as it is now constituted, will reach a point where it will begin to pay out more than it takes in. Obviously, something needs to be done about this. President Bush’s solution to this situation is (a) to cry “wolf” when the wolf is 40 years away, and (b) to dismantle the whole system. As the AARP has been saying, this is like tearing the house down because a faucet is leaking.

There are three main solutions to the problem: raise payroll taxes, cut benefits, or shift the system to include private accounts. No politician in his/her right mind is going to raise taxes or cut benefits for today’s retirees to pay benefits for future retirees, some of whom are not even of voting age yet, so the President has settled on private accounts as the answer, and now we can ask “who benefits?”

I can’t find anyone who thinks that the mid-21st Century retirees will benefit. The most optimistic analysis I’ve seen shows a hypothetical retiree breaking even with today’s system if they get very good returns on a private account. At best privatization will trade a system of certain returns for one in which returns are a gamble.

Wall Street may see some marginal benefit, but that seems unlikely given many retirees will be likely to be very conservative and likely to go toward, for example, buying and holding government and municipal bonds and mutual funds, rather than generating the kind of trading that makes Wall Street firms serious money.

So why is the President in such a lather about Social Security? Ideology. Neoconservatives consider Social Security the most vulnerable part of what they consider to be welfare state US – Social Security, Medicare, and Medicaid, programs designed to avoid the insecurity of pre-depression America. The modern right wing wants to stop what they consider big government by a dual strategy of bleeding and starvation – cut taxes, then use the resulting deficits as justification for cutting spending on social programs.

On the starvation front, the federal revenue as a share of GDP is at a fifty-year low, largely because of a decline in revenues from personal income tax and corporate profits tax, i.e., as a direct consequence of the Bush administration’s cutting taxes for the top incomes, whose tax payments as a share of GDP are at the lowest level we’ve seen since 1942, while taxes on middle- and working-class Americans are at near-record highs, and the President’s new budget continues to give new upper-income tax breaks while proposing cuts in low-income benefits such as child care assistance and food stamps.

This President has already succeeded in dividing America more than it has been divided since the Civil War. Now he proposes to deepen the division by attempting to destroy the programs that have supported lower- and middle-income Americans since the depression. The President and his neocon followers must be stopped from destroying Social Security, Medicare, and Medicaid.

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