Bush would inflate the deficit to �piratize� Social Security
By Jerry Mazza
Journal Contributing Writer
Jan 14, 2005, 20:37
I suppose it�s convenient and easy to call George Bush and
his administration reckless and crazy, what with racking up a $524 billion
deficit in 2004, the largest portion of it is a consequence of tax cuts for the
wealthy. On the other hand, there is a method to the madness of King George
After having taken care of the wealthy, George has been put
in the dreamed of Republican position of destroying Social Security. As with so
many social programs, dismembering Social Security is something the Republicans
have been dying to do since Franklin Roosevelt created it in 1935.
What�s more, Bush�s proposal to create private investment
accounts to supplant Social Security involves borrowing $2 trillion more to set them up. That seems even more
ludicrous to the fiscally sane. Of course, billions of that will go each year
to brokerage houses for handling the accounts, and keep more Republicans happy,
put more average Americans at financial risk and/or with reduced benefits, and
impoverish more poor Americans than ever. So King George�s "class
war," which he ardently denies conducting, nevertheless is now being
pushed as ham-fistedly as his war to democratize (destroy) Iraq. But even one
of Bush�s best men has a problem with the private account giveaway.
Monday, The New York
Times reported in "For the Record on Social Security" that one of
Karl Rove�s top aides, Peter Wehner, Bush�s director of strategic initiatives,
wrote in a memo, subsequently leaked: "If we borrow $1�2 trillion to cover
transition costs for personal savings accounts," that is without making
benefit cuts, "we will have borrowed trillions and will still confront
more than $10 trillion in unfunded liabilities. This could easily cause an
economic chain reaction: the markets go south, interest rates go up, and the
economy stalls out." Couldn�t have put it better myself.
But even as Bush does his best to drum up and sell
a Social Security crisis, you can trust that the that Social Security Trust
Fund, supported by its own tax, amplified by interest it accrues on its
surplus, takes in far more money than the system pays out. The date the trust
will run out, according to Social Security Administration estimates, keeps
moving back to the future. This fact is noted as well by Paul Krugman, Times columnist and Princeton economics
professor, in his article "Confusions about Social Security" in The Economists� Voice, Volume 2, Issue
1, 2005. Krugman points out, "10 years ago [the date] was 2029, now it�s
2042 . . . SSA estimates are very conservative, and quite moderate projections
of economic growth push the exhaustion date into the indefinite future."
Remember that, "indefinite future."
The one way that the Social Security Trust Fund will not be
trustworthy is if Congress should misguidedly vote not to honor U.S. government
bonds that Social Security holds. That�s not likely to happen. No more than the
U.S. would not honor the billions in U.S. bond debt Japan holds, or the
billions European and American investors hold. It would be the beginning of the
end for the U.S. economy. Therefore, the 2018 date is not a real worry, but one
made up by the administration to frighten and mislead Americans. Where we
really have a problem is in the federal General Fund, which should only run as
well and as responsibly as Social Security.
What would have been a great safeguard for the Social
Security Trust Fund, something that Al Gore among other people suggested, was a
"lockbox" to protect the trust from little government hands that were
borrowing big bucks from it for other programs. Thus, as reported by the TREA
Senior Citizens League, the fact that we did not �lock off� the trust fund
allowed the government to do some Enron-style book-keeping in 2003. And so, on
February 25, 2004, Representative Gene Taylor of Mississippi sponsored a
constitutional amendment to "lock off" government Trust Funds.
George Smith, chairman of TREA Senior Citizens League, had
this to say about the amendment not being approved. "If the amendment [to
lock off the SS trust fund] had been in place . . . the federal deficit would
have been reported as $584 billion instead of $374 billion under the �unified�
deficit. In other words the federal government helped itself to $210 billion in
retirement money, replacing it with nothing but IOU�s." Smith added,
"Removal of the retirement trust funds from the government�s budget not
only is important for a more accurate picture of the federal deficit, but also
for a more accurate picture of trust fund solvency. That�s because a
significant portion of what the government is calling �income� to the trust
funds is not real cash, but only �interest� on paper," i.e., treasury
What�s more, as Representative Taylor said, "The
government counted $150 billion as �interest� earned on those IOUs"
(treasury bonds). In essence, the government took $200 billion in cash from
Social Security, and took an income credit for the $150 billion the paper
(bonds) earned. From one pocket to the other, now you see it now you don�t. But
how many pockets does the government have? Yours, mine, your neighbor�s, your
wife�s, and so on.
During the 2000 presidential campaign, Gore kept saying we
should put Social Security and Medicare funds in a "lockbox." He
warned repeatedly that the government should not keep spending the surplus
generated by those programs. The Baby Boomers were soon to retire and that
money would be needed to keep the system flush. But did the government listen?
Nooooooo. Or at least the Bushies didn�t. It wasn�t in their big picture.
Of course, when Alan Greenspan testified before the U.S.
House Budget Committee and said that Congress would have to consider cutting
Social Security and Medicare benefits to future retirees, and consider raising
the minimum qualifying age, everybody listened, real close, including the
neocons, who salivated at their golden opportunity. And by the way, when Greeny
participated in "fixing" Social Security in the 70s and 80s, it was
to raise SS taxes and raise age requirements. There were a few other twists.
A reader emailed me one, her personal experience. She
couldn�t collect any of her husband�s Social Security when he died, because she
was a schoolteacher who had retired on a state pension. A little clause they�d
sewn into SS revisions in 1983 said that any spouse who had any kind of civil
pension couldn�t collect their deceased spouse�s SSA benefits. This little
beauty was called the GPO, Government Pension Offset, which occurred during the
Reagan years. Before enactment of the Government Pension Offset, Social
Security would have paid her a full wife�s benefit in addition to her
So, today it�s okay to cut income taxes for the rich, cut
their capital gains taxes on dividends, cut their corporate taxes, all
simultaneously, but to a widow to keep her and her husband�s pensions
simultaneously? Uh-uh, tough nuggies, kid.
In addition to the massive tax cuts to the rich, we have the
corporate welfare to HMOs and drug companies, thanks to the provision
forbidding the government to negotiate with the drug companies on prices. So
that sucking sound you hear is money coming from the workingman�s retirement
plan and his health plan to pay those drug sticker prices. But then, the
Republican grandfathers fought to the death to kill these plans in the first
place. Now they�ve got a shot at making them come true. If we�re lucky, they�ll
all get heart attacks first.
Parenthetically, Wal-Mart, one of Bush�s largest
contributors, not only negotiates with all suppliers on all prices. If it
doesn�t like the prices, it can put the middlemen out of business by
negotiating with and buying direct from manufacturers, whether it�s Pete the
Trivet Manufacturer or Proctor & Gamble. Or it goes to China-Mart and has
goods produced on cheap and thumbs its nose at American companies and their
working people, its target customers. You can call it free enterprise. I call
it a free hosing.
Returning to Medicare, let�s take last year�s prescription
drug law. If it really goes into effect as promised, it will hurt the long-run
federal budget by much more than the entire accounting deficit of Social
Security. Something Krugman also pointed out in his piece. He goes on to say,
"If markets really looked far ahead, the passage of that law should have
caused a sharp rise in interest rates, maybe even a crisis of confidence in
federal solvency. In fact, everyone pretty much ignored the thing�just as
they�ll ignore the putative future savings in the Bush plan . . . What markets
will pay attention to, just as they did in Argentina, is the surge in good
old-fashioned debt." From our government, of course.
So what do we do about Medicare? Ignore the distant future,
Krugman suggests. "Bear in mind, the main reason medical costs keep rising
is that the range of things medicine can do keeps increasing . . . life-enhancing
medical procedures that didn�t exist a decade or two ago . . . Intergenerational
responsibility is a fine thing, but I can�t see why the cost of medical
treatments that have not yet been invented, applied to people who have not yet
been born, should play any role in shaping today�s policy." Pretty decent
Thus, as the Trojan Horse of private accounts has been
constructed as a gift from Bush, and is being pushed in the center of our media
square, let us beware. The horse is loaded with cutthroat types from Wall
Street. It�s loaded with inconsistencies in budget doctrines, bogus political
economics, in fact bad economics, weapons of mass neocon fiction that can kill.
It�s designed for the unsuspecting, for anyone who thinks the Republicans and
their neocon cousins could possibly wish us well, today or in retirement.
Remember one thing if nothing else. To them, we�re lunch, their perceived
doormats, our backs a stairway to climb on to the top. Those who forget that
are doomed to live some dark days in the future.
And even those among them, who know how pernicious their
plans for us are, are afraid to deviate from the party line, the corporate
think/speak. Afraid they might lose that next chance at the bigger job, the
bigger retirement perk, the speaking tour, the private jet, or the university
chair in their name, and so on and on. They�ve covering their butts. Make sure
you cover yours. Say no, every day in every way, to private accounts, and to
dismembering Social Security in any meaningful way. It�s your inheritance for
your work, for your future.
They may try to say there�s no link between today�s payroll
tax and tomorrow�s Social Security. They may try to blow away the success of
the trust fund, say it�s nothing because it�s invested in government bonds.
Their rhetoric only makes the success of the Social Security Trust Fund more
potent in contrast to the government�s fiscal failure. And that debt, as many
have said, has been fecklessly increased to eliminate all social programs.
What�s more, they�ve used the war on terrorism as an open-ended reason to spend.
They�ve used the poor economy as a reason to slash the taxes to the rich. The
truth is, we�ve never cut taxes in a war before. That�s the big idea from the
pea brains. But fight it. Fight them, every step of the way, because they�re at
war with us, the everyday working people and the retirees as well. And
that�s a real terror.
Jerry Mazza is a free-lance writer and life-long
resident of New York. Reach him at email@example.com.
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