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.
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.
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.
The Social Security Tax rate was – and theoretically still is – 7.5%, with half paid by the worker and half paid by the employer.
Back in those bygone days when Ronald Reagan decided we actually needed to do something about deficit spending and avoid paying crippling amounts of interest on our national debt to foreign nations, the bright idea of borrowing from the Social Security Fund came along.
“Let’s double the Social Security Tax and declare
the increased tax to be a loan to the government’s general fund. In exchange, we will increase future Social Security Benefits when today’s worker retires.”
This ridiculously irresponsible notion became law when Bush Senior was president and Junior was sitting around the Oval Office as a go-fer, about the same time as the Resolution Trust Company was created – and funded with federal tax dollars – in order to bail out the owners and bondholders of Savings & Loan companies (that had recently been de-regulated) from their irresponsible and careless loans.
The people who wrote this law wrote it for the benefit of the extremely wealthy, knowing that the whole pattern was designed to shift all the costs of government over to the lower 90%, the people who actually work for their living and them, now earn and own only 10% of this country’s income and wealth.
Obama’s next step is going to reiterate Junior’s second act* as President – going to the Social Security headquarters in West Virginia and pulling out those special US Government Bonds that they’ve been receiving in exchange for those annual “loans” from our Social Security Fund and declaring those bonds to be “just paper.”
Does any of this sound vaguely like a familiar pattern? Bait and switch, anyone?
*Junior’s first act was to promote the Texas Air National Guard guy who was his superior officer
back in the day, and had the originals of his service records, to general. You can look it up.
Keep going, and you may even find the story behind
Senior’s abandoning his aircraft over Ie Shima, leaving his crewmen trapped in a plane that flew on for another half hour before running out of gas and crashing into the Pacific. No one would fly with him after that, and they didn’t want another Bush Scandal demoralizing the working class (Grandpa had been selling aircraft fuel additives to the Nazis), so they gave Senior the Navy Cross and sent him home to play hero and sell war bonds.
(WW2 was funded by voluntary contributions, not taxes.)
They do play us for chumps, don’t they?
“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.
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.