Social Security
Bush would inflate the deficit to �piratize� Social Security
By Jerry Mazza
Online 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 & Court.

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 bonds.

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 government pension.

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 argument.

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

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