No ‘crisis’ in Social Security
National Leadership is in ‘crisis’ as it
attempts to dupe America
By MARK A. MARTINEZ, Ph.D.
Sunday / March 27, 2005
security is not in crisis. What is in crisis is our national leadership, which seems
bent on putting ideology and the interests of Wall Street above the good of the
that social security will go broke by 2018 President Bush says that there is no
trust fund because we have already spent the money you and I pay in payroll
solve the problem the president is offering privatized investment funds to build
financial nest eggs we can use in retirement. Fair enough. The problem,
however, is that to make his point the president is deceiving America.
make his argument work, the president needs you to believe that the social
security trust fund is insolvent. The only way it becomes insolvent is if the
federal government says it will not honor its obligations. Let’s start from the
1983 Ronald Reagan appointed a commission that recommended collecting an
additional 2% in payroll taxes to keep social security steady. The result was
higher taxes on the middle class, but an additional $1.2 trillion in government
revenue since 1983. The government can do many things with this money but chose
to purchase government bonds held in trust by the federal government. Hence, the
social security trust fund.
the signing of the constitution (Art. VI) every purchaser of U.S. sanctioned treasury
notes has been able to bank on the promise that they will be repaid (with
interest) by the federal government. The only way for this not to happen is for
Washington to say we will not meet our obligations.
is where President Bush’s deception of America comes into play.
president and his advisors maintain that the $1.2 trillion accumulated in the
trust fund (in the form of government bonds) does not constitute a real asset. Imagine
what you’d say if your financial advisor told you the government bonds in your investment
portfolio aren’t worth anything because “they’re just IOUs and don’t constitute
real wealth.” This is precisely what the president is asking all Americans to accept
with the social security trust fund.
specifically, he’s telling every bond holder that America no longer has a
fiduciary or moral obligation to pay its debts. This position might be OK if
you’re a Banana Republic, or a third rate tyrant, but the United States of
are several schools of thought why the president is pushing America toward third world
- First, many believe President
Bush simply cannot tolerate successful government programs, and views
privatization as a way to destroy social security and undermine FDR’s New
Deal legacy. To do this – as was the case with going into Iraq – the president needs the
economic equivalent of a threatened “mushroom cloud” to scare America. Hence, the bankrupt trust
- Second, it’s argued that the Bush
Administration is so incompetent they simply don’t understand the
implications of undermining social security. I have a hint: Look at the
condition of America’s elderly in the 1930s.
- Third, the Bush administration is
simply doing the bidding of Wall Street, who want trillions of new
investment dollars to accelerate profit levels.
your poison – I think it’s a combination of all three – one thing is certain: social
security is not in trouble. However, for the sake of argument, let’s assume we’re
in trouble and it’s the year 2018. What should be done? Here’s my plan.
- First, rescind Bush’s tax cuts
for the rich. This would add approximately $1.8 trillion to government coffers
over the next ten years. This is responsible for three reasons. One, we
can use the money to buy out the trust fund the president says will be
broke by 2018. Also by “saving” the trust fund we won’t have to borrow the
$2-4 trillion necessary to make the transition toward privatized accounts.
Finally, because America’s middle-class overpaid payroll
taxes for more than 20 years, the surplus initially used by President Bush
to justify tax cuts for the rich (“It’s your money”) wasn’t really theirs to return in the first
place. With no surplus, the justification for tax cuts for the rich simply
makes no sense (and spare me the “tax cut-job creation” lie).
- Second, why don’t we raise the
cap on payroll taxes? Today, all income above $90,000 is exempt from the
payroll tax, which releases approximately 15% of all income from the
social security tax. This contrasts with twenty years ago when only 10% of
national income was exempted by the cap. This imbalance needs to be
addressed, and could be with a new ceiling at, say, $200,000.
- Finally, we could discuss
raising the eligibility requirements, or reduce social security cost of
living increases (COLAs) by one-half percent per year? And privatization? I’m
not opposed to private accounts (I have a couple of my own), but if you
have to borrow $2-4 trillion to fund the transition, and still cut future
benefits, it’s not worth it.
the end, the case for crisis and privatization is disingenuous, damages America’s long-term
credibility, and undermines our future. The fact that the president doesn’t
understand this should be cause for worry.
Martinez hold a doctorate degree and is an associate professor of political
science at Cal State Bakersfield.