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Social Security Last Updated: Jan 4th, 2007 - 01:08:31

Bankrupting Social Security to finance fascism
By Jerry Mazza
Online Journal Contributing Writer

Feb 26, 2005, 21:10

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In 1935, the year Social Security was created, Sincliair Lewis created his amazingly prescient novel, It Can�t Happen Here. In it, a Bible-quoting, folksy politician, Senator Buzz Windrip, backed by ruthless power brokers, uses the democratic electoral process to make himself dictator. He promises "a chicken in every pot" and then some to a country gutted by civil unrest, racism, anti-Semitism, high unemployment, financial scandals, and a fear of foreigners.

Lewis found his story model in 1933 Germany, in which an explosive economic downturn fueled Hitler's thrust for power. This was paralleled by Benito Mussolini�s rise to power in Italy. Both brutally suppressed dissidents at home while they prepared for preemptive wars against perceived enemies abroad. Ironically, Lewis�s story is seen and told through the eyes of Doremus Jessup, a liberal editor and writer for his small-town Vermont newspaper, The Fort Beulah Informer.

The Pulitzer Prize-winning Lewis wrote his story when the United States and Western Europe had been in a depression for six years. In the story, America is in the grip of a presidential campaign in which the populist Senator Windrip fronts for a shadowy cabal intent on seizing the White House for their narrow, self-interested agenda. His main adviser and soon-to-be secretary of state, the ever-scheming Lee Sarason, could easily, eerily, be a stand-in for Karl Rove.

Winning the election, the new administration immediately ends crime in America by suspending civil liberties and having Windrip�s reactionary Minute Men rounding up everyone that objects. The story evolves into Windrip�s forming the fascist political group, the Corporatists, or Corpos, attacking, imprisoning and murdering numbers of people who opposed them or are simply accused of opposition, not unlike Hitler Brownshirts or Mussolini�s Blackshirts.

During this time, Doremus Jessup loses his paper for his liberal opinions. In time, he joins an underground group, and is eventually jailed for distributing "seditious" material that he�s written. He endures beatings and torture in jail and horrific living conditions, yet manages to survive and eventually escape, like the truth itself, and migrate to Canada where he is taken in by friends.

During Doremus Jessup�s absence, the Corpos begin to unravel. Sarason has Windrip deposed as president, claiming that he had been embezzling the people�s money and was plotting with Mexico to avoid a war that the administration wanted, not unlike the war the U.S. once wanted and was prepared to lie to get with Cuba, as with Iraq and Vietnam. Sarason takes over the presidency and has the vice president also exiled as a traitor to the Corpos cause.

Then Lewis delivers another stunningly prescient turn of plot: Sarason turns out to be gay and having gay sex orgies in the White House with a cadre of hand picked younger men on his staff. And so the grim Secretary of War, Dewey Haik has Sarason and his playmates murdered as they party, assuming the presidency himself. In essence, the Corpos are beginning to self-destruct after having nearly destroyed America. This, as Doremus Jessup returns from Canada to the U.S. underground, to rejoin the fight against the failing Corpos. The ending is left open-ended, like the future, like ours today.

The success of It Can�t Happen Here as a novel led to its production as a play by the Federal Theater (a project of the WPA). The play opened simultaneously in October 1936 in 17 in cities across the United States. By the election two weeks later over 500,000 Americans had seen it. After FDR was re-elected, Congress formed a committee to investigate the play and its impact on the election.

As a result, Hollywood censors cancelled a film production of the play planned for 1936. They were concerned it would be seen as an attack on the Republican Party. At the time, Republicans more than Democrats opposed anything that might lead to war with Germany. The committee also cut the funding of the Federal Theater that originally produced it, bankrupting the group.

Ironically, Congress made the committee permanent, renaming it the House Un-American Activities Committee, setting off a dark period of Communist witchhunts and gave rise to Senator Joseph McCarthy, Red hunter extraordinaire, and his assistant Roy Cohen who eventually was outed as gay and who died of AIDS, as depicted in Tony Kushner�s Pulitzer-Prize winning play, Angels in America.

Both McCarthy and Cohen spent the better part of their careers cynically looking under every bush for Reds, destroying careers and lives by the handsful. Today George W. Bush rattles under the same bushes, nooks, cranies and corners, seeking out terrorists, although his chief target, Osama bin Laden, still seems to allude him.

At the very least, It Can�t Happen Here is a fiction both strange and predictive of the kind of reality in which we are living. It�s an example of an America gone amok in authoritarianism, even if today it�s called Homeland Security or the USA PATRIOTIC Act. Its lesson is something to carry with us, especially as Alberto Gonzales� nomination was approved by a 60�30 margin in the Senate. Gonzales stands ready to be an even more compliant attorney general than John Ashcroft (if that�s possible).

As the president�s legal (or illegal) counsel regarding the kind of torture prisoners being held in Guantamo, Afghanistan and Iraq could be subjected to, Gonzales seemed to envision torture as nothing short of death itself. One of the louder voices protesting Gonzales�s performance, at his nomination hearing, came from newly elected Senator Barak Obama from Illinois. He marveled at Gonzales�s lack of awareness or contriteness for his past bad advice to Bush.

The Rub with Privatization

Then too Bush�s proposed "privatization" of Social Security feels like something out of It Can�t Happen Here, part of a systematic attempt to bankrupt and eliminate the nation�s greatest retirement and social program to prop up an increasingly speculative stock market and sagging economy. Privatization would require borrowing up to $4.5 trillion, a low ball estimate, over the next two decades to start some 155 million accounts. Add to that another $60-$70 billion annually to administer those accounts by Wall Streeters and we are dancing with financial disaster, public and personal.

Paul Krugman, in his 2/4/05 New York Times article "Gambling With Your Retirement," described privatization being " . . . in effect, as if your financial adviser told you that you wouldn�t have enough money when you retire�but you shouldn�t save more. Instead you should borrow a lot of money, buy stocks and hope for capital gains."

Krugman adds, "If you put a piece of your payroll taxes in a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent." Got that?

As the Brookings Institution�s Peter Orszap says, "It�s not a nest egg. It�s a loan." All the major papers reported that recently in great detail. In fact, even before Bush�s State of the Union speech "a senior administration official" made it clear the plan calls for you to "borrow, speculate and hope." Ergo, we have a less than zero improvement on Social Security, as we know it.

The lesson is you�re taking a loan from the government to buy stocks with a 3 percent return on your investment. But, stocks don�t perform, good luck, you lose. "If you invested your private account in government bonds," as Krugman reports the official at the briefing made clear, "you would face benefit cuts equal in values to your investment, so you would be no better than under the current system."

And in truth, a financial adviser will tell you to plan for retirement with a mix of stocks and bonds. They disapprove of borrowing to buy stocks, or as it�s called on the Street, "speculation on margin." Perhaps because the latter helped break the stock market in 1929. But Bush is asking America�s those under 55 to do just that. And all this has nothing to do with fixing Social Security to make it work even better.

As the senior official says, "In a long-term sense, the personal accounts would have a net neutral ("no") effect on the fiscal situation of Social Security." But it would have a negative effect on your situation. It could deprive you of a significant portion of or all of your Social Security benefits. In fact, the more you increase privatization, the more you will need to pay for it with "slashed benefits." That will come out of your retirement pockets. In the big picture, this is a way of impoverishing senior Americans as you offer them a "bigger chicken in their pot." But the truth is, a good piece of everybody�s chicken will be going in the stock market pot to feed its ravenous appetite for cash.

Ironically, Bush has used Chile as an example of a country that�s tried privatization. He didn�t mention this was implemented in 1981 under the notorious dictatorship of General Augusto Pinochet. The general, with the help of the Nixon administration, Henry Kissinger and the CIA, was responsible for the assassination of that nation�s democratically elected president, Salvador Allende, ironically on September 11, 1973, in a bloody military coup. On gaining power, Pinochet also instituted, with the help of his American �friends,� Operation Condor, a program of repression, political persecution, mass arrests, summary trials, systematic torture and "disappearances," secret executions and detention by death squads. So the big "It" happened there as well.

During Pinochet�s 17-year run, some 3,000 people were executed (after being brutally tortured) and some 30,000 brutally tortured, all for the sake of ousting a democratically elected socialist with an unelected brutal military regime that supposedly would bring "free enterprise" to Chile.

There is a correlative story to this from oft-proposed democratic presidential candidate, Lyndon LaRouche, in his article "Bush�s Social Security Privatization: A Foot in the Door for Fascism." LaRouche reports that stealing Social Security funds is a worldwide phenomenon. It�s not only happening in Chile. Social Security and worker benefit plans are under attack in Peru as in Mexico, Germany as well as France. LaRouche sees this attack as conducted by the scions of bankrupt banking-systems to grab the large social welfare funds of their governments. The United States is obviously one of the players, which is why Bush has made it clear that his immediate, number-one target is to "reform" Social Security via privatization. In fact, Bush was the first sitting president in the 70-year history of the program to seriously propose privatization. But he had some help.

In 2000, his friends from the reactionary Cato Institute planted the privatization notion in Bush�s mind. This as noted in Richard Freeman�s "Cato Institute: Anti-Capitalist Clique Leads the Attack on Social Security."

Freeman tells us that in 2001 the Cato Institute�s idea blossomed into "Bush�s misnamed Commission to Strengthen Social Security (CSSS). Its December 2001 final report called for Wall Street-administered individual accounts outside of traditional Social Security, and for Social Security retiree benefit cuts ranging from 10�45 percent. Cato ran the commission, staffed it, and wrote some of its worst recommendations. But the CSSS was presented to the public as a bi-partisan, independent commission acting on behalf of the president. Also, consider the �constituency groups� clamoring for privatization: the Alliance for Retirement Worker Security; For Our Grandchildren; the United Seniors Association, etc. These were all directly created by Cato; and members of their boards of directors and the senior staff are Cato members or alumni."

The Cato Institute itself is the offspring of its present president, Ed Crane, and Charles Koch, oil and energy fortune heir, the leading figure of the notorious Mont Pelerin Society. The MPS was created in 1947, two years after FDR�s death, in Lake Geneva, Switzerland, with the ideology of radical free trade, unrestricted free-market speculation, deregulation, monetarism and that financial aggregates, not men, rule society. So here you have the wellspring of many of the neocon rants against government social programs. This is also noted in Richard Freeman�s piece.

LaRouche points out, "[George Bush says he supports the dollar, but] he can't support the dollar�he can not support the dollar. Not under the present circumstances. Why? Because it takes $2 billion, coming in every day, from outside the United States, to keep the U.S. dollar from collapsing�and it is collapsing!� He added, �Now, that money is beginning to dry up."

LaRouche believes, and I agree, that Social Security funds are needed now to absorb losses from the huge derivatives� bubble of the financial markets. In LaRouche�s words, "The administration knows that very soon, there is going to be a real avalanche that's going to hit the U.S. financial market. They want to steal Social Security�they're going to steal all of it; not some of it. What they're talking about is the shoe in the front door, but they intend to put the whole foot in. Once they get the first step, then you will see, as they did with the Iraq war, get the first step, get in there, and the whole thing comes." That�s a tough example to turn your back on.

LaRouche�s words often sound like an update of It Can�t Happen Here . . ."Just as the welfare issue was the issue, which was key in Europe when Mussolini and Hitler came to power . . . we're faced with a threat of dictatorship. And if we cannot mobilize political resources, especially in the United States, to stop this thing now, we will have given up our Constitution and our rights. And when these guys come after us, they're going to come all the way�because they are faced with a broken-down system, and they're going to go for a dictatorship. . . .

"This . . . president is out to steal the Social Security of the American people. Not just a few poor people. We're talking about the majority of the American people who will be looted by this thing�and many will be killed by it. When you combine this with the effect on the health-care situation, people will be murdered, by this kind of policy . . .

"On the face of it, the plan is Grand Theft of the sort that makes Enron look like petty larceny. Bush is proposing to steal trillions of dollars in hard-earned retirement funds to bail out a hopelessly bankrupt monetary system. He's prepared to throw the old and sick on the scrap heap. And the very same propaganda machine that brought you the Iraq war disaster is already gearing up a new Big Lie campaign, to convince you that it is in your interest to turn over your hard-earned retirement funds to the biggest gang of Wall Street swindlers and fools ever to walk the planet.

"What Bush is planning to ram through is nothing less than a full-scale fascist austerity regime, the Hitlerian kind that the Synarchist bankers were unable to put in place in the U.S. in 1933, because of Franklin Roosevelt, but were able to install in Chile in 1973.

"That plan can be stopped again�as FDR did 70 years ago . . . Americans can be mobilized to turn Bush's manic drive to privatize Social Security, into his Waterloo . . .

"The fact is that the Chile privatization of social security was never the bankers' main objective. The real prize was always the United States. The very same cast of characters that orchestrated the Chile project�a fascist coup to loot an economy into bankruptcy, and then to resurrect the corpse and loot it again by stealing the social security fund�this same crew is pushing the U.S. project today."

Another irony LaRouche points out is that, " the Chilean Labor Minister who personally sponsored the pension fund heist was Jos� Pi�era. Today Pi�era is a close advisor to Bush, and the leading spokesman for the global Social Security privatization project, and has been for decades. He functions out of the Cato Institute, and travels the world over promoting the Chilean model of theft."

The Dark Shadow of George Shultz

Also, as La Rouche points out, " . . . Even more significant is the role of George Shultz. Shultz has been there every step of the way for the Chile project. From the Nixon Administration, he helped orchestrate the Pinochet coup [with his friend Henry Kissinger]. And he justified it on the basis of the University of Chicago economic policies, of which he is a leading light."

Schultz soft-peddles his actions in his autobiography: "General Augusto Pinochet came to power, bringing dictatorship and repression to the political scene. But he did restore prosperity to the economy. Chileans trained in free-market economics at the University of Chicago applied the ideas of classical economics, opening the Chilean economy to international competition, eliminating subsidies, relying on market signals to direct investment, seeking fiscal balance and a stable monetary policy. These policies worked." Worked how, and at what cost?

LaRouche also points out that "from his role as an advisor to the incoming Reagan Administration in 1981, Shultz visited Pi�era and asked the former Chilean Labor Minister to provide him with a one-page memo on the pension privatization plan, for Shultz to try to sell the scam to Reagan. Shultz's Chicago Boys in Chile had barely implemented social security privatization there, and Shultz was already trying to ram it down the throat of the U.S.�23 years ago!"

Remember that it was also Shultz who worked from 1971�73 with Nixon to unpeg the dollar from the gold-reserve system towards the floating-exchange that has gone hand in hand with financial insecurity and globalism. Treasury Secretary Schulz hammered the coffin nails into Roosevelt�s protective gold standard in 1973 at an International Monetary Fund meeting, two and a half weeks after Pinochet�s coup gave birth to Shultz�s "Chile model of fascist economics for international export."

Today, Shultz is one of the senior luminaries of the George W. Bush Administration. It is not surprising he�s still pushing to get his policies through, personally and through the Cato Institute, which has provided abundant financing for numerous "Social Security crisis" campaigns. These included the writing of books, informational materials, and having Leanne Abdnor, Cato stringer and VP for External Affairs from 1995 through 1998, "educate" Congressional members and staff on the virtues of personal retirement accounts in Social Security reform.

"The lesson should be clear," LaRouche warns. "From 1971 on, the bankers' �Leporellos� [representatives of wealthy oligarchic families] in the United States and elsewhere have known full well that they must either junk their financial system, or move to �save� it with global fascism. For the past 30 years they have sought to wipe out the opposition to fascism . . . and to create the conditions under which a broken American population would welcome its imposition, first in the rest of the world, and finally, at home. After Sept. 11, 2001, they thought they had their coup, but they have been unable to consolidate it, again in large part due to the leadership of the resistance . . ."

Richard Freeman points out, " . . . the onrushing financial collapse left Wall Street needing, and demanding more. On Feb. 17, 2004, the Cato Institute�s Michael Tanner, executive director of the Privatization Project headed by Pinera, released the Cato reported entitled, �The 6.2 Percent Solution: A Plan for Reforming Social Security.� [Previously they were looking for 2 percent or one third of the 6.2 percent payroll tax for private accounts.] The report asserted that all of the 6.2 percent workers� payroll tax should be diverted into workers� Individual Accounts, rather than into the Social Security system, and thence into the stock market."

This plan is based on a very sharp benefit reduction that the Social Security System would pay out to retirees.

Freeman also points out, "Finally, the plan drops the bomb of default. Tanner states that according to his reading of the law, under Social Security, �workers have no legally binding contractual or property right to their Social Security benefits, and those benefits can be changed, cut, or even taken away at any time.� (emphasis added) Tanner is cold-bloodedly arguing that the government can default on the $1.5 trillion in Treasury bonds held by the Social Security Trust Fund (Treasuries securities are the way that the Trust Fund holds its surplus), and that the U.S. government can severely cut or repudiate its Social Security benefit obligations to millions of elderly citizens. Immediately after Bush�s re-election, Bush Administration officials started regurgitating Tanner�s treacherous argument. Tanner et al are rabidly fighting to get the Bush Administration to adopt Cato�s maximalist policy of diverting the full 6.2 percent . . . into Individual accounts." The truth is, as Freeman states, "The Social Security Trust Fund, in fact, holds Special Obligation Treasury Bonds of the United States."

Freeman also answers Cato�s calling the Social Security Trust Fund a fraud . . ."Would one want to publish that statement today in Chinese and Japanese, perhaps, and speculate on the reaction in U.S. treasury debt?" I don�t think so, especially considering the hundreds of billions in U.S. treasury debt each of those countries hold.

LaRouche feels, "now . . . with George W. Bush's being declared the winner of the Nov. 2 presidential elections, the Synarchist bankers think they have the opportunity they've been waiting for. They are wrong. Bush's manic drive to push through Social Security privatization may be the biggest mistake of his political life�and lead to his downfall . . . This may be the end of George Bush . . . because of this desperation to plunge ahead with this swindle on Social Security."

Let�s hope LaRouche has the ending right. Certainly the neocon story line, with Bush as protagonist, is no less strange than the plot of Sinclair Lewis� cautionary novel. My caution is that we consider what�s happening with the utmost sense of reality, even though it often seems like fiction. We need to resist first and foremost both the erosion of Social Security as well as our civil liberties, and secondarily, any cuts of social welfare and education programs laid out in the new Bush budget. Remember he is asking $83 billion more for war. And that�s certainly not a war on poverty.

Jerry Mazza is a freelance writer who resides in New York City. Reach him at

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