by Paul Gallagher
Recognize the lies of Wall Street and Bush about the privatization of Social Security:
Lie No. 1: "President Bush never said 'privatization.' He just wants to strengthen Social Security. His opponents are using scare tactics."
Truth: That was for the suckers during the election campaign, who thought George W. Bush was their personal lord and savior. He lied about it scores of times, then came out in the open demanding privatization after Election Day. Each member of his Commission on Social Security had been hand-picked in 2001 on the condition of being a supporter of privatization of Social Security.
Lie No. 2: "To make sure the retirement savings of America's seniors are not diverted to any other program, my budget protects all of the Social Security surplus for Social Security, and for Social Security alone." Bush's Feb. 27, 2001 address to a Joint Session of Congress.
Truth: George W. Bush's budgets, since then, have taken $509 billion of surpluses from the Social Security Trust Fund and used them for general Federal budget expenses, including his wars, so that he could deliver tax cuts to businesses and wealthy Americans.
While other Presidents have also "borrowed" Social Security surplus for their budgets, Bush and his father are the only two Presidents who have looted every single dollar of Social Security surplus that came into the Trust Fund on their watch. Senator Harry Reid (D-Nev), speaking on the floor of the Senate, has rightly called this "embezzlement."
Lie No. 3: "I think some members of Congress could take some lessons from Chile, particularly when it comes to how to run our pension plans. Our social security system needs to be modernized." George W. Bush in Chile, April 2001.
Truth: Social Security privatization was imposed in Chile by the fascist military dictatorship of Gen. Pinochet, which by 1980 had already destroyed the labor movement, depressed the wages of Chileans, exiled and assassinated opposition leaders, and was selling off state companies to foreign bankers, cheap; then they turned over public pension funds to the same bankers. A generation later, most Chilean retirees, with their "private accounts," don't even qualify for a minimum pension, and have to depend on government minimum retirement of welfare payments. Chile's privatization is judged a failure by the Chilean government and even by the World Bank.
The British privatization of public pension funds has also failed.
Lie No. 4: Social Security is a state program invented in 19th-century Prussia, which blocks employees from "ownership" of their own retirement fund.
Truth: Social Security was started by President Franklin Roosevelt because the U.S. Constitution calls upon the government of the United States to "promote the General Welfare"—not to promote "private investments." Social Security saved the elderly from the destitution brought on when the "private investments" of the 1920s collapsed. Under the principle of the General Welfare, the younger generations support the basic security of the older generations in their retirement, keeping them from poverty, and provide a surplus, to the benefit of their children and grandchildren.
Social Security has been successful for 70 years, through three full generations of Americans' retirements, and only small and occasional adjustments in its tax rates and ranges are needed to keep its commitments into the future. It's the only thing solvent in a debt- and deficit-ridden U.S. economy. Three-quarters of the company pension funds in the nation have been abandoned by their corporate sponsors, the rest are underfunded; Social Security remains solvent and trustworthy. It has provided better broad benefits, with cost-of-living adjustments, than private social security schemes like the British system, the "Galveston Plan" in Texas, etc. As for the "Chile model" of the privatizers, it's been a disaster for more than half the workforce in Chile.
Lie No. 5: "The United States government has no legal obligation to pay Social Security benefits to retirees."
Truth: The management of the funds and payment of the benefits by the Federal government, is an obligation of the United States created by the Social Security Act of 1935. The right-wing privatization ideologues at the Cato Institute and elsewhere make this claim because they want Treasury to keep "borrowing" from the Trust Fund without repaying, and to destroy Social Security for ideological reasons. Any similar claim from within the Bush Administration would constitute a threat to cut off benefits.
Lie No. 6: "Social Security is in crisis. The crisis is here. There is an $11-trillion deficit.
Truth: Wall Street is in crisis; the U.S. dollar is in crisis; the U.S. and world economy is in a collapse crisis worsened by Bush Administration policies; but President Franklin Roosevelt's Social Security system is not in crisis. No competent agency has projected any $11-trillion deficit, nor half that.
But Bush's business and upper-income tax cuts are generating a $14-trillion long-term deficit in the general Federal government budget. Bush wants to add anywhere from $2-6 trillion to U.S. debt to pay for privatizing Social Security—turning the contributions over to Wall Street in "private accounts," then going to Wall Street to borrow the money to pay retiree benefits.
If the Bush Administration stopped running huge deficits and repaid to Social Security the money improperly borrowed from the Trust Fund for other government expenses over the years, Social Security would be in surplus for at least another 40 years—without changing the payroll tax rate or range at all. If a U.S. President, instead of losing jobs and depressing wages, knows how to restart real high-technology employment growth in the U.S. economy, Social Security will be fully solvent through the 21st century.
Lie No. 7: "If Social Security isn't privatized now, taxes will have to be raised or trillions borrowed in the next decade, or benefits cut."
Truth: This is another form of blackmail threat, by a bankrupt Bush Administration and a desperate Wall Street, to cut off Social Security benefits unless they get trillions in Social Security contributions to support the Wall Street bubble a while longer. In fact, real economic growth, with small adjustments in the Social Security tax range alone, will keep the system solvent indefinitely.
Lie No. 8: "Wall Street doesn't have much at stake in Social Security privatization; its fees would only be a few tens of billions over 70 years."
Truth: Wall Street and Boston "Vault" banks like JP Morgan Chase and State Street Bank are the original and the biggest funders of the Cato Institute Social Security Privatization Project, the cog-wheel since 1995 for the schemes to loot Social Security. These banks would haul in, conservatively, $950 billion in fees over 70 years, according to the thorough study by Prof. Austen Goolsby of the University of Missouri. More important, Wall Street would rake trillions in new accounts into the falling stock markets.
Lie No. 9: "Younger workers will be able voluntarily to choose to put just a part of their Social Security tax contributions into a private investment account instead."
Truth: The Chile model of privatization was mandatory for all young workers. They were barred from entering the old public pension system.
General Pinochet's Labor Minister, who privatized Social Security in Chile, now heads up the Cato Institute Privatization Project, which instigated President Bush's manic drive for privatization. The Cato Institute private-accounts scheme becomes mandatory after a few years, for all employees born after 1954; and it calls for diverting all, not a part of the employee's Social Security payroll taxes into a private account.
This will happen if Bush gets his way. There will be tremendous economic pressure, as well as political pressure to reduce future benefits by kicking workers out of the Social Security system into the arms of Wall Street investment banks. Why? The trillions in new debt which Bush proposes to borrow to privatize the system, will create the crisis in Social Security he's claiming.
Lie No. 10: "Nothing will change for those at or near retirement; their benefit check won't be touched."
Truth: If privatization goes through, benefits will be reduced by $18 trillion. For retirees who have been in the middle 20% of Americans by income, Social Security benefits would be reduced, in the privatization scheme of Bush's hand-picked Commission, by 6% over the next decade; 10% in the decade after that; 15% in the decade after that. The non-partisan Congressional Budget Office (CBO) showed this; and Stephen Goss of the President's Commission admitted it on Dec. 9: "It [Bush's privatization plan] clearly would provide for slower growth in benefits than under current law. The private accounts will provide an opportunity for the worker to make that back up." Goss estimated benefits would be cut by $18 trillion through mid-century. President Bush knew this three years ago when the Commission made its recommendations.
In fact, despite these ideologues' fantastic, lying assumptions about the earnings young workers will allegedly be making in the stock and bond markets, the sad reality is that Americans' remaining Social Security benefits will be cut by much more than the CBO has estimated, if Bush's fascist privatization goes through. After being blown up into a brief new bubble by trillions stolen from Social Security, Wall Street will collapse and leave retirees with nothing. "Enron I" left hundreds of thousands with empty 401ks and lost corporate pensions; Bush's "Enron II" will steal the retirement of tens of millions.
Lie No. 11: "Younger workers will get a private account the government can never take away from them."
Truth: The Bush Administration has already illegally "taken away" more than $500 billion from the Social Security Trust Fund to pay other government expenses; yet Social Security has never taken retirees' accounts away from them. If Americans fall for diverting Social Security payroll taxes into stocks and bonds accounts instead, a Wall Street crash will "take away" the retirement they are foolish enough to put there.
Lie No. 12: "Equity [stock] investments earn high rates of return over the long term. By the principle of compound interest, these younger workers will be able to earn a better return on funds for their retirement."
Truth: If American workers' Social Security payroll taxes had been invested, instead, in the Standard and Poor's 500-stock index for the last five years, they would have lost money, overall, in their "private accounts,"—according to Standard and Poor's itself.
This repeats the Enron syndrome with Americans' 401k private retirement accounts; in surveys one-third of Americans with 401ks say they've lost so much in them that they'll have to keep working long past retirement. Social Security will really be "in a crisis" if President Bush is allowed to shift it to Wall Street.
The idiot President, whose own business ventures all failed, believes he's just discovered the "miracle of compound interest." The Social Security Trust Fund already earns compound interest on the investment of its surplus in Treasury bonds—and every year, Bush's White House has looted the fund of its surplus and its interest, to pay for war, "homeland security," and tax cuts for businesses and wealthy Americans.