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Bush, Wall Street: Keep Your Hands Off Social Security!

by Adam Price |
January 2, 2005
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San Jose, CA - Over the past four years, retired workers have faced a double-barreled attack as companies do away with their retiree health plans and dump their pension plans. At the same time, the fall in the stock market has reduced the value of 401-k plans for older workers and retirees, forcing many to have to work longer. Now the Bush administration has declared that it will move forward with plans to begin to privatize Social Security, creating personal investment accounts with the money that used to go to Social Security benefits. This would be a windfall for Wall Street, which could collect up to $15 billion dollars a year from ‘managing’ and ‘advising’ these retirement accounts.

Social Security is the foundation for most workers’ retirement. Two-thirds of the elderly get more than half their income from Social Security benefits, and one-third rely on Social Security for more than 90% of their income. Social Security also insures the families of retirees and the permanently disabled - indeed, about 30% of all Social Security benefits go to non-retirees.

Just as the Bush administration raised the threat of ‘weapons of mass destruction’ to whip up support for the invasion of Iraq, they have created the myth that Social Security will go bankrupt and won’t be there for today’s workers. If the ‘official estimates’ are right, and no changes are made to taxes or benefits, Social Security has enough funding for 38 more years. Then, either benefits would have be cut by 25%, or payroll taxes raised by one-third. Currently, payroll taxes that pay for Social Security are about 12%, half paid for by workers and half by the company, so tax taken out of your paycheck would have to rise from the current 6% to about 8% - in 40 years, mind you!

These so-called estimates are about as flimsy the administration’s evidence of weapons of mass destruction in Iraq. They are based on the assumption that the number of immigrants will actually decline from today’s level and that economic growth will drop by more than half - to the slowest rate since before the Civil War, when the United States was an agricultural nation.

Supporters of privatization are also two-faced - in that they argue that Social Security will go broke because the economy will slow dramatically, but then they hold out the promise of big increases in stock prices based on past history when the economy grew quickly. Wall Street also wants you to believe that your investments would rise at the same rate as the average stock price (about 10% a year over the last twenty years). In fact, the typical stock investor only saw between a 2 to 3% gain, not even enough to keep up with inflation, since the benefits of rising stock prices mainly went to Wall Street, corporate executives and other insiders who rig the system.

The Bush administration also would like to hide the fact that even a partial privatization of Social Security would cost one to two trillion dollars. This is because Social Security is a ‘pay-as-you-go’ system, where today’s workers pay taxes that pay today’s retirees’ benefits. The monies diverted to private retirement accounts would have to be made up in higher taxes, more borrowing or lower benefits.

Social Security will have a funding shortfall as the baby boom generation, born after the Depression and World War II, begins to retire in the next five years and run down the Social Security trust fund, which has about a $1.5 trillion in it right now. But the long-term funding problem for Social Security could be largely solved if the tax base was expanded. Right now Social Security is paid for by a regressive tax system that only taxes wages and salaries up to $87,900. Any pay above that, and any income from real estate, stocks, bonds or other investments are not taxed at all. Expanding the current Social Security taxes to cover all income would not only be fairer, by taxing the incomes of the well-paid and wealthy, but would also increase tax revenue by more than 20%. If started now, this would be more than enough to cover the Social Security shortfall, even under the unrealistic ‘official’ estimate.

But Bush and the Republican Party work for the rich, and would never take this step. So for now, we will need to educate workers about the myth of ‘Social Security bankruptcy’ and organize to fight the Bush administration and Wall Street’s grab for our Social Security benefits.

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