Second Thought: Wednesday, March 23, 2005
The Great Social Security Heist

The president’s plan sounds like dem-a-goguery to some folks.


Did you know that the Social Security trust fund will be bankrupt by 2018? Did you know that when Social Security was begun in 1935 there were 42 people paying into the system for every person receiving benefits and that by 2040 that ratio will fall to two working people for every retiree? It’s called dem-o-graph-ics, folks. Whoa! Something’s gotta give here.
These are just some of the things that President George W. Bush has said in his drive to convince the country and Congress to effectively dismantle our Social Security system, and our Dallas-Fort Worth area Congressional delegation is 100 percent behind him. But the truth is that many of Bush’s claims make no sense.
The Social Security program was created to eliminate or at least lessen the human misery associated with permanent loss of the ability to work, death of a breadwinner, poverty in old age, and many of the calamities that can befall families. It is a brilliant concept involving pooled risk and shared costs using funds earned by workers and funds paid in by their employers. Over the years it has proved to be the best-managed program our government has ever undertaken. Its problems are small potatoes compared to those associated with the overall United States economy, the additional strains that the Bush administration has imposed with his war of choice in Iraq, and his administration’s position that job outsourcing benefits Americans.
Before the Social Security program was established in 1935, there was no safety net for families whose breadwinner became disabled or died, for orphans, or for working people who were unable to save enough for their old age. Social Security has virtually eliminated these extreme hardship situations and provided a basic level of income for all workers who, for whatever reason, find themselves without sufficient means in their old age.
The president’s vaguely defined proposal is really a prescription for killing the Social Security program. The president says that, to save the program, one-third of the Social Security tax dollars will have to be invested in private investment accounts. (Think of brokerage fees!) It is not clear whether this one-third of the taxes would still be augmented by mandatory contributions from employers as is the situation today. (How do you suppose that will play out?) So with only two-thirds of the income and the same demographics, Social Security will be saved?
The president himself has admitted that privatization does not solve the alleged funding crisis. Most analysts agree that the transition cost of this privatization will increase the costs of Social Security by about $1 trillion in the first decade and an additional $3.5 trillion in the second decade. The total amount of Treasury securities the trust fund now holds is near $2 trillion, and Bush’s plan will increase that debt by another $4.5 trillion. Now, if the U.S. won’t be able to redeem the Treasury securities the trust fund is holding when they are needed (as critics claim), how will the U.S. be able to pay the additional $4.5 trillion needed to privatize the program?
The trust fund may last for another 75 years or be depleted by 2042, depending upon which projections we use. At that time its current tax revenues will provide about 73 percent of full benefits. Today U.S. revenues pay only 68 percent of its current yearly expenses. So 40 years from now, the Social Security program will have a better balance sheet than the entire U.S. government does today. If the condition of Social Security 40 years from now is a crisis today, what does that say about the U.S. economic condition today, never mind the future?
Finally, a privatized system will definitely have losers who will have to live in the kind of poverty and deprivation that was rampant before Social Security. That’s not an acceptable alternative to anyone who claims to be compassionate, is it?
Jerry Lobdill is a retired Fort Worth physicist and freelance writer and a “Howard Dean Democrat.”

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