Scary government IOUs

Corporatization of Social Security Watch

What people have to remember about the Social Security debate is that there are many in the GOP who have been trying to kill Social Security for decades. And they have been using fear as their argument for a long time now. I remember reading a book by P.J. O’Rourke called Parliament of Whores more than a decade ago, in which he describes the coming crisis in the Social Security funding the retirement for the Baby Boom. O’Rourke, like so many other before him and so many after him, raised the scary boogieman of the idea that the assets of SS exist only as an IOU from the government. Granted, he made the point primarily to talk about the Feds raiding the Social Security fund for the general fund, and also as a way to point out that Social Security is not a big savings plan, a big pile of money. But the implication was there, that because SS only owns a government IOU, that the program was in jeopardy. I remember thinking at the time, “I’ll bet Social Security will collapse before my retirement.”

(Amazon.com tells me that this book was published in 1991, 8 years after Greenspan and Reagan saved Social Security with a whopping increase in wage taxes. So O’Rourke really should have known better than to fear-monger on this issue [unless, as is likely, he was just acting as a loyal GOP foot soldier]. But even in the book he cited 2030 as the year the trust fund would run out of money to pay current levels. Even 2030 [which has been extended to 2042-2052 in current estimates because of the economic boom of the 90s] would have been past the time when a very large portion of the baby boom generation would have passed away. So O’Rourke still should have known better.)

My conclusion was exactly the one that conservative liars have been promoting for a long time, and it’s the one they want (especially young) people to come to. The fact is that Social Security is alive and well, and will be very fine for a long long time. The only way the GOP can kill it is if lot’s of people stop believing that it is alive and well and start looking for alternatives. We really are in a Tinkerbell situation here. All we need to do to save Social Security is believe in it (and clap our hands). And if you actually examine the numbers, there is no reason not to.

But let’s look at the GOP argument about the sscaaaary pile of IOUs which constitute the assets of the SS trust fund. There is a real danger here, and GOP scaremeisters and I agree on what the danger is, but ironically it reveals that the real danger is them. Let’s explore what this “IOU” scenario really implies:

IF at some point in the future, the federal government is so irresponsible with the revenue and spending for the general fund (perhaps for example issuing huge tax cuts for the very rich, income tax cuts for top earners, elimination of the inheritance tax, reduction of taxes on investment income, while at the same time starting massively expensive, unnecessary foreign wars, in which war profiteers misappropriate nauseating amounts of taxpayer money), IF the finances of the general fund are driven into a ditch

AND

IF the government ends up relying so heavily on its wage tax income for general fund expenses that they decide that they need to declare a “crisis” so that they can justify killing off Social Security, allowing the greedheads in charge of the country to screw over retired people (current and future)

AND

IF the people of this country let them do it

THEN Social Security really is at risk if its only assets are IOUs.

(See how if you follow their argument it implicates them? Weird).

The other argument you could make is that if the federal government gets into so much trouble that it needs to DEFAULT ON ITS DEBTS like some kind of third-world junta (I’m looking at you, Argentina), that would first of all be a major crisis the likes of which we have never seen before in this country – it would likely spell the end of our government as we know it. Secondly, if that point is ever reached, why would the government consider stiffing Social Security, which after all represents all of our citizens? Why not decide not to pay back the bonds held by foreign governments or foreign investors or rich domestic investors first? Why target SS bonds? Because they want to kill SS. QED.

Bill Frist, Senate Majority leader, bride-at-the-alter-leaver, cat-killer, and all around hypocrite, has been found on network shows saying SS runs a $10.4 trillion dollar shortfall. This number is if SS expenses are run out to INFINITY based on our current set up. Nice honesty, there, Bill. More details.

Thanks to Gary for finding this article, which was written by the authors of the Social Security: Phony Crisis book, and summarizes their arguments quite nicely.

Also this week found a memo from the GOP outlining their SS “strategy” in which the saving of the plan is not the goal, rather the destruction. The memo is described here and Josh Marshall comments on it.

Two strikes, and here's the windup

Disaster Relief Watch

Here are links to organizations which are helping out with the tsunami relief efforts. Keep those unfortunate people in your thoughts.

Social Security Watch

I’m going to harp on about Social Security for a while yet. I hope you are not tired of the subject, as I probably won’t stop worrying it until SS is either destroyed (sorry, “privatized”) or the GOP fails in its attempts to do so. Why? Why should I or anyone else care about whether Social Security survives?

Many people who work put more money into SS than they will eventually receive from it in benefits (though this is not always true, even for top earners). So for many people, Social Security is a net loss of money over their lifetime. And what do they get out of it?

They get a country where the elderly and infirm aren’t literally starving in the streets. They get a country where widows and people blinded and hobbled by disability have some means of at least staying above the poverty line. They get a country that at least in some ways, is willing to try to take at least the minimum of care of its people.

That’s an excellent bargain to me. I don’t want to live in the GOP dream/fantasy world, where everyone’s worth is measured by the amount of money they produce, or the amount to which they are self-sufficient. A wise man once told me that life isn’t fair, and he was damn sure correct. A society that takes that into account, and at least tries to ease the burdens of the most unfortunate, the most vulnerable, the weakest, is one that is worth living in.

Now, the basic underlying tenant of Social Security is that some people cannot save enough for their own retirement to prevent them from starving in the street. Some of that is bad planning, some of it is bad luck, some of it is brought about by forces in the world, some is brought on by the people themselves. But it is undoubtedly true. If a society helps to prevent that happening, you have a form of social security. If everyone is just saving for their own retirement, then you have no social security.

What Bush is proposing is that people be forced to save for their own retirements, through means that the government will designate (and that will incidentally expose wage taxes to deliciously high fees for the investment community . . . and also serve to pour ridiculous amounts of money into that near-Ponzi scheme known as the stock market – sweet!). Therefore, since everyone is saving for their own retirement with no guaranteed benefits, ipso facto, there is no more social security.

Therefore, Bush’s “privatization” really is the end of social security. It isn’t “reform”. It is destruction.

In Bush’s own words, he has said “And the question is whether or not our society has got the will necessary to adjust from a defined benefit plan to a defined contribution plan.” This statement reveals most obviously what they are aiming for (though they STILL have not outlined a real plan with details). A defined benefit plan is one where benefits, some level of return, are guaranteed. A defined contribution plan is one in which all they promise is how much they are going to take from you, and never make any promises about what you will get back. (Many of you currently being hosed by such changes in your pensions understand this bit of legerdemain).

To sell this horrible idea, the GOP dangles this carrot in front of working people: that they could possibly make more in private investment accounts over the long term.

Never mind that many of the assumptions in this carrot simply aren’t true Let’s accept Bushco’s claim at face value that on the whole, many people would be making out with more money from private investment accounts over the course of their lives. Who is being forgotten in this equation?

Lots of people. Widows and children who depend on one person for their income, when that person suddenly dies before very much money is in their “private account”. Blind people and people who are disabled, who can’t put very much money in their “private account”. Millions and millions of people who cannot make enough money to provide for their entire retirement, even with careful planning and good return on investments. Wages have been stagnating for 30 years, as our own uberclass takes it stratospheric income and leaves workers with crumbs. And now they are suggesting that we trade one of the only things designed to keep working people safer in exchange for exposing their crumbs to the slings and arrows of outrageous fortune (and perfidious investment houses) that make up Wall Street. Madness.

The assumption that stocks bring better returns is not always true, either. For example, see this article: One man's retirement math: Social Security wins

For 45 years, the defense-industry analyst paid into the system until his retirement in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute of Technology graduate, decided to go back and check his own records. Would he have done better investing his money than the bureaucrats at the Social Security Administration?

He recorded all the payroll taxes he paid into the system (including the matching amount from his employer), tracked down the return the Social Security Trust Fund earned for each of the 45 years, and then compared the result with what he would have gotten had he been able to invest the same amount of payroll tax money over the same period in the Dow Jones Industrial Average (including dividends).

To his surprise, the Social Security investment won out: $261,372 versus $255,499, a difference of $5,873.

Next time, we will take a look at that “scary” pile of IOUs the GOP likes to wave in your face when they talk about Social Security.

A war of aggression based on lies was Big Mistake number 1. Reelecting this cabal of thieves was Big Mistake number 2. We are lining up for strike three in this game of “How Stupid Are We?” and I don’t like our odds. The leadership of the GOP is evil and organized. The Democrats are scattered, and have been proving they aren’t worthy of our desperate hopes for years now.