The great Social Security raid, take two

Yesterday Barack Obama signed the stimulus bill; today he’s visiting Arizona to unveil his $50 billion-or-so plan to help with distressed mortgages; and next week, the administration promises, he’ll execute an about-face and start talking fiscal responsibility for the long haul.

When he does, you’ll want to listen carefully to what he’s got to say about “entitlement reform,” because it may tell us a great deal about Obama’s view of the latest scheme for raiding the Social Security trust fund, one that’s far more deft and subtle than George W. Bush’s frontal attack. 

The new campaign to hijack Social Security is the subject of William Greider’s cover story in this week’s issue of The Nation. It’s the brainchild of private equity eminence and former Nixon Commerce Secretary Pete Peterson, the Yoda-like prune of a man pictured above on the magazine’s cover. Peterson’s plan, which has the backing of a formidable part of institutional Washington DC, amounts to a more passive theft than the Bush proposal. You first have to understand that the government has been robbing the Social Security trust for years–that is, spending Social Security tax proceeds on the rest of the budget, to the tune of about $200 billion a year. So although Social Security now enjoys a theoretical surplus of $2.5 trillion, what it really possesses is that amount in IOUs. Peterson wants to take back the IOUs to offset the trillions in government bank bailout commitments the government has made and will make. If this project succeeds, Social Security is then well and truly broke, and politically it’s a short step from there to doing away with the program as we know it in the name of fiscal responsibility. 

So read Greider’s story and keep an ear out for Obama’s fiscal discipline talk next week, because his position in this fight is one of the most important stands he’ll take in the next four years.

 

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Comments (5)

  1. Submitted by John N. Finn on 02/18/2009 - 01:44 pm.

    I’ll look up the article, and revisit Pererson’s 2004 book “Running on Empty”. As I recall it, he made his Concord Coalition’s dire predictions about unsustainable entitlement commitments. But at the end of the doom and gloom, his recommendations sounded more like tweaking than radical change. As I recall, anyway.

  2. Submitted by Bernice Vetsch on 02/18/2009 - 01:45 pm.

    We should all write to Obama and our members of Congress to make sure they understand a few things:

    Social Security is not a retirement fund but an insurance policy against poverty in old age (almost eliminated), family destitution when the main breadwinner dies before retirement (helps more children than Medicaid), impoverishment if a worker is disabled before retirement (one out of every seven workers).

    The scare-talk tactics the Bush privatizers used over the past decade spread un- and half-truths. The $12 billion shortfall Bush himself “agonized” over, for instance, would actually be taking place over the next 75 years. Social Security was in a similar situation in 1983 because of the boomer generation, but a small rise in withholding taxes eliminated any chance of a shortage, hence the $2.5 trillion on hand.

    Using these government bonds for any other purpose would be a crime against those who will be retiring soon or not retiring for 50 years.

  3. Submitted by Gerald Abrahamson on 02/19/2009 - 11:32 am.

    “You first have to understand that the government has been robbing the Social Security trust for years–that is, spending Social Security tax proceeds on the rest of the budget”

    Now this is the silliest claim made.

    Today, the govt will spend the amount needed to do whatever it wants to do. The only question is “From where does the cash come?”

    Borrowing from the SSTF saves the govt the various costs associated with borrowing from capital markets–which would also reduce investment in the US (money invested in govt securities are not invested in business). The govt pays market interest rates–which will be used to pay future benefits.

  4. Submitted by Jeff Kline on 02/23/2009 - 08:32 am.

    I’m with the many others that feel if the Federal government has been raiding the fund for years, and then turns to just nullify the whole system; this would be tantamount to taking several hundred thousand dollars from each and every retiree with no intention of paying it back. This would leave many of us with nothing coming in after we’re “forced” to retire. In essence, this might even be construed as a form of genocide because of the mass amounts of folks that would die off due to lack of available income to survive.

    If I had my “druthers”, I’d be saying that maybe it’s time to force government to stop doing the “Rob Peter; Pay Paul” thing and get their budgets back in line with how everyone else does it. Being they have been “borrowing” against it for years, also says that we’ve all been cheated to some extent. Wouldn’t you? It flies in the face of the purpose for which it was once created. It probably would be very solvent today had it not been pilfered through. Just my humble opinion.

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