Social Security:
The Attack Is Heating Up

Apr 17, 2005

Bush, in his first news conference after re-election, proclaimed he would spend the big political capital he pretended to have won in the election to push for a "reform" of Social Security.

In the loose sense in which most people use the term, "reform" connotes an "improvement." In Bush’s mouth, it meant a huge and almost unprecedented attack. He was proposing to break up at least part of Social Security into private accounts run by Wall Street and—although the didn’t say it then—to cut benefits by as much as 40% over the next two decades.

Even before any details were released, a big part of the population was suspicious of Bush’s proposal—with good reason. To privatize Social Security, meaning to hand over its funds to Wall Street to play with and absorb profit out of, could only jeopardize the program. And the experience that many people had already had with the 401(k)’s, which had supplanted part or even all of their pension plans, highlighted the risk.

But in early February, public suspicion turned to outright hostility when the Bush administration, under questioning, finally admitted that it did intend to cut benefits. Vehement opposition was especially strong among seniors, despite Bush’s assurances that the benefits of current retirees would not be touched.

The Republicans in Congress felt the heat, and a number of important Republicans in both houses of Congress publicly distanced themselves from Bush’s plan. The administration was forced to stall the introduction of any specific legislation. Instead Bush, the Social Security Administration, the Labor Department, the Commerce Department, and even the chairman of the Federal Reserve kicked off a big campaign to convince the population that Social Security was "in crisis." The highlight of this campaign was Bush’s "60 cities in 60 days" road tour. But the tour had hardly got underway when it became obvious that even people in Bush’s hand-picked audiences were reacting with suspicion and distrust. Bush discovered he had spent nearly all his election capital—and here it was, barely a month after he was inaugurated. Bush let the tour virtually drop out of sight. Most other Republicans weren’t really eager to take up the issue, either.

The Democrats to the Rescue

At the beginning, the Democrats had angrily denounced Bush’s plans to privatize Social Security and promised to defend the program practically to their last drop of blood.

But with Bush’s Social Security plan clearly in trouble, the Democratic leadership stepped forward, grabbing the ball. In early March, Democratic Senate Leader Harry Reid sent Bush a letter signed by all but three of the Democratic senators, offering to talk with Bush about Social Security reform. Grabbing, as usual, for a fig leaf, Reid declared that if Bush would only take privatization off the table, the Democrats were ready to "establish the kind of cooperative bipartisan process we need to close the long-term funding gap."

In early April, the Democrats announced that they had put together their own plan to "reform" Social Security, the contents of which are still, as of this writing, secret.

In fact, the Democrats don’t even oppose "privatization." Clinton in his second term had already put forward a plan to merge Social Security with private accounts—before the Monica Lewinsky affair did in his presidency. And even today, the 41 Democratic Senators who signed the letter to Bush said they were ready to discuss "personal accounts outside the retirement system." In the twisted logic of these scam artists, they declared Social Security could use a supplement, because it doesn’t provide a big enough benefit.

What nonsense—if the Social Security benefit isn’t big enough, then increase it. Adding private accounts is nothing but a Trojan Horse, the first step that would set Social Security down the road to eventual privatization, even while draining part of the money into Wall Street’s bulging pockets. That is what happened with 401(k)’s and other individual retirement accounts, which at first were supposed to supplement traditional pensions, only to gradually replace them. The 401(k)’s certainly didn’t supplement pensions, and in many cases, they replaced the pensions with something much less secure, and much less generous.

In any case, the Democrats, like the Republicans, say that Social Security is "in trouble" and needs to be "reformed." In mid-March, the Senate unanimously passed a resolution—43 Democrats, 56 Republicans and one independent all in favor—that pledged lawmakers would "work together at the earliest possible opportunity to enact legislation to achieve a solvent and permanently sustainable Social Security system." It’s a bunch of hogwash, but one thing is notable—it lays down the framework for the attack on Social Security, by declaring that changes are needed to make it solvent.

They Say "Reform" When They Mean "Attack"

Up until now, neither party wants to make the details of their plan public—understandably, because it would be likely to set off more reactions. Nonetheless, details have been leaked to the press—apparently in an attempt to get the population used to the idea.

Given the early response, privatization may well be toned down or even abandoned—for the moment, anyway. But privatization has always been a kind of diversion, drawing attention away from the basic attack, which right now is being prepared, under the call to make Social Security "solvent and sustainable."

According to accounts in the press, both parties are discussing the possibility of raising the retirement age. In 1983, Congress already had raised the retirement age from 65 to 67, an increase right now being phased in. In the next "reform," they may try to raise it to 70.

Most workers already find themselves working too long. And these politicians, most of whom have never done a day of real work in their lives, want to make it longer. And it’s not just a question of how long we work—but where we work: in our earlier years, in the physically demanding and mentally deadening jobs that most of us have; in our later years, working at jobs that pay little, like bussing tables at McDonald’s for the minimum wage. This whole situation recalls the song written in an earlier era when workers were first fighting to establish pensions: "too old to work, and too young to die."

Both parties, apparently, are thinking about lowering benefits, particularly those paid to future retirees, by changing the formula that ties the benefits people first get when they retire to the evolution of wages over all the years they worked. As it is already, retirees lose out, because once they start drawing Social Security, their benefits no longer keep up with the more or less general increase in wages over the years, which is a function of the increasing productivity in society.

The two parties are also discussing decreasing the starting benefit by increasing the number of years that someone has to work to get a full benefit from the current 35 years to 38 years. This would hit women the hardest, since most women take some time off from work to have and raise children. It would also penalize workers who were unemployed for extended periods of time, which is also becoming more frequent.

The final subtraction from benefits can come through adjustments in the government’s own Consumer Price Index. Social Security has an annual cost of living adjustment, which is supposed to compensate retirees for increases in prices—which it doesn’t completely do, of course, as anyone who has ever lived on Social Security can attest. This COLA, like most COLAs on wages, depends on the government’s Consumer Price Index, and every time the government tinkers with that index, retirees fall further and further behind inflation.

Finally, the politicians are discussing raising the taxes that today’s workers pay into the Social Security fund, thus taking more money out of our wages today.

The one thing they are NOT proposing to do is to impose the Social Security tax on every dollar earned at the very top end of the wage scale. Any income over $90,000 a year goes untaxed for Social Security. William Clay Ford, Jr., Ford Motor CEO, pays not a cent more than a skilled worker in his plant who works heavy overtime, and not all that much more than does a minimum wage worker, working heavy hours.

So let’s say it clearly. This "reform" they are talking about is nothing but a plan to make workers pay more taxes and work longer in order to draw lower benefits for fewer years. "Reform"? Nonsense—this is nothing but an outright attack.

The Doomsday Scenario

To justify this outrageous attack, both parties claim that a big increase in the number of retirees, the Baby Boomers, is soon going to swamp the Social Security system, so that there won’t be enough money to pay future benefits.

In other words, their argument boils down to one simple-minded premise: there are too many old people. And they practically say it this crassly. Look at what Bush said, making the case for "reforming" the system in a December radio address: "In the 1950s, there were about 16 workers paying for every Social Security beneficiary. Today, there are about three. And eventually, there will only be two workers per beneficiary."

Such comparisons are not only misleading because they ignore how society is organized, they are banal. Active workers don’t support only the elderly; they also support other people, including children, disabled members of the family, non-working spouses, etc. In the 1950s, which Bush refers to, there may have been many fewer retired people for active workers to support, but there were many more children—the very same Baby Boomers, who were then in their childhood years. Those children were not yet part of the active workforce. But an entire infrastructure was constructed and staffed to take care of them, including nurseries, schools, health care facilities, recreation facilities, etc. So if the population is aging, as Bush says, and there is a growing proportion of the retired, there is also a smaller proportion of children for the active workforce to support directly and indirectly. When economists look at the society overall, they don’t see much difference in the proportion of "dependents" between the 1950s and, for example, 2035—the time frame that Bush is referring to.

Bush’s statement is misleading in another, even more important way. It doesn’t take into consideration the vast increase in productivity since the 1950s. Increased productivity means that fewer workers produce more goods and services more. In other words, and this is very important, each person’s labor can support more people. For example, over the last 40 years in this country, the percentage of the civilian work force actually working in agriculture declined from five percent to one percent This big reduction did not mean that there was less food. On the contrary, a much smaller workforce produced not only all the food needed by a much larger population, but increased exports as well.

The same is true across the board in the production of necessary goods and services. The increase in productivity, which is vast, could provide the possibility for even more people to retire—and be supported by these famous "two workers" Bush talks about. But for that to happen, the benefits of increasing productivity need to go to the workers who have created the wealth and to their families—and not, as has been so much the case in recent years, to the bourgeoisie, which has been draining off almost all the benefits of increasing productivity, vastly increasing their own personal wealth.

Of course, neither Bush nor the Democrats are about to raise that question. Instead, we are treated to reams of predictions about which year the money will run out—a real doomsday scenario. Once again, from Bush: "In the year 2018, for the first time ever, Social Security will pay out more in benefits than the government collects in payroll taxes. And once that line into the red has been crossed, the shortfalls will grow larger with each passing year. By the time today’s workers who are in their mid-20s begin to retire, the system will be bankrupt..."

As many times as Bush uses the words "bankrupt" or "go belly-up," you would think that Social Security is practically out of money already. And he produces plenty of charts and graphs to prove it—as do all the news media.

In the first place, the studies Bush and the others cite aren’t worth much more than the paper they are written on. The economists who actually prepare the reports admit that such long range predictions are little more than guess-work. The Social Security Administration itself is so unsure about what is going to happen beyond a few years from now that it actually prepares three different scenarios every year, which it then revises the following year. According to one of these three scenarios—which the politicians pretend does not exist—there will be no problem at all with Social Security for the next 75 years, which is as far into the future as they look.

The Social Security Cash Cow

This is not the first time that politicians claimed that it was necessary to "reform" the Social Security system because an increase in the number of retirees would bankrupt it. Carter did it, in 1977, and Reagan did it again in the early 1980s. Reagan, in fact, appointed a "Blue Ribbon Commission" headed by Alan Greenspan, the future chairman of the Federal Reserve—the same Alan Greenspan who today predicts catastrophe if something isn’t done. Remarkably, he was making the same predictions in 1983. Then, too, he talked about the looming crisis caused by the Baby Boomers—as though they were a swarm of locusts about to descend. Then, too, he proposed that the Social Security tax be raised (it had already been raised under Carter, but he wanted the raises to roll in faster than scheduled); then, too, he proposed that the age of retirement be raised; and then, too, the COLA was reduced by the government’s "revising" of the CPI—as a matter of fact, it was revised 13 times since 1983, and every revision reduced retirees’ and workers’ COLA in some way. All these changes, according to Greenspan and his commission, would not only assure Social Security’s solvency, it would accumulate a big surplus in the trust fund in preparation for that fateful day when the Baby Boomers started to retire. This attack, which then too was called a "reform," was pushed through by both parties.

So what happened? Social Security began to produce ever bigger surpluses. Last year alone, this surplus came to almost 180 billion dollars. The accumulation of these annual surpluses already amounts to almost two trillion dollars, and the Social Security administration says that these surpluses will continue to grow for at least 12 more years, to a grand total of over six trillion dollars!

So Where’s the Crisis?

No, Social Security isn’t in crisis. The government’s regular budget is.

During all those years that Social Security was building up a surplus, the federal government was "borrowing" it. However, very soon now, the loan will be coming due. Every administration since the surplus started to accumulate, Democrat or Republican, and every Congress, whether controlled by Republicans or Democrats, have put their hands on the Social Security surplus. They used it to fund government operations and close the budget deficit—deficits caused by tax breaks to the corporations and the wealthy, money spent on wars and the military, subsidies to the corporations, etc. Over the past two decades, as the Social Security surpluses have become steadily larger, the Republicans and the Democrats steadily cut the taxes that the corporations and the wealthy paid. Currently, the receipts from Social Security and Medicare taxes account for 41% of all government revenues. This is almost four times what the government gets from corporate income taxes, and even a little bit more than what the government gets from all personal income taxes.

In other words, while raking in more Social Security taxes, as the result of earlier "reforms," the government was putting it into the pockets of the wealthy and the corporations, through cuts on their taxes. Government expenditures are being paid more and more by Social Security taxes, a regressive tax that hits working people the hardest.

This political scam about preparing for the Baby Boomers has been used for several decades, but now the government has a problem. The bill is coming due. Starting in 2008, the first of those annoying Baby Boomers are going to retire and start drawing Social Security benefits. And when they do, the size of the surplus produced by Social Security taxes will begin to shrink. Over the years, the surpluses will continue to shrink until there will be no more yearly surplus at all—the famous 2017. So Social Security will need to start using some of the interest payments the government owes on what it borrowed from Social Security to pay all benefits—no problem for retirees, but a big problem for the government. Where will it get the money? And that problem will only be aggravated, when the government needs to actually touch part of the surplus accumulated in the past to pay out benefits.

But, again, where will the government get the money? The money it already gave away!

That’s what Bush means when he says there really is no money in the fund. At a photo op in early April, staged at the Bureau of Public Debt in Parkersburg, West Virginia, Bush rifled through a few folders in a file cabinet, then said, "There is no ‘trust fund’," he added with his usual smirk, "just IOUs."

What would it take for the government to honor the commitment it made to all those workers who have put their money into the fund over all those years? It would have to reimpose all those taxes on the corporations and wealthy that every administration has cut over the last 30 years.

That’s the real crisis the Bush administration and the Democrats are talking about—they would have to take some money from the bourgeoisie.

Neither Bush, not the rest of the Republicans, nor the Democrats intend to pay back the trillions of dollars in retirement money that the government already stole. Not only that, they intend to "reform" Social Security once again, so it goes on producing big cash surpluses. That is, they have every intention to keep Social Security as their cash cow, so that instead of funding all of our retirements, it will become an even more important source of revenue to the government, used to further enrich the capitalist class.

After already stealing trillions of dollars through the 1977 and 1984 "reforms" of Social Security, the politicians are looking to steal trillions in yet another "reform."

Doing the Bosses’ Dirty Work

Facing this enormous attack, some organizations claim to take the side of retirees against this attack and to defend Social Security.

For example, AARP, the enormous organization with millions of dues-paying seniors, has taken out a lot of advertising in newspapers and on television opposing the privatization of Social Security. But at the same time, the AARP openly discusses the need for "reform," and in the most disgusting way. In an April article on the AARP web site, Thomas Bethell discusses how eventually, the cash that has been built up in the trust fund will have to be drawn down to pay benefits—as it was supposed to. But then he concludes that "rather than cash in the bonds held by the system’s trust funds—which would require the government to raise taxes, borrow money or cut budgets because lawmakers have been tapping the funds to cover other expenses—many experts agree that it would be better to take steps soon to keep the system solvent."

In other words, this man writing in the AARP journal, says it is "unreasonable" for people to expect to have access to the money that they paid into the trust fund over all these years for their retirement. Effectively, it gives the OK to the government to continue this enormous subsidy to the wealthy, by stealing from Social Security. And, just like the Republicans and the Democrats, this AARP writer also discusses the need for more Social Security reforms—that is, sacrifices—by the population.

In fact, the AARP’s stance on Social Security reform is no different than the role it played a couple of years ago, when it supported Bush’s plan to add a drug benefit to Medicare. Under the guise of helping seniors, the drug benefit is nothing but an enormous subsidy to the pharmaceutical companies, as well as the big companies with health benefits attached to their pension plans.

But none of this is a surprise given all the ties the AARP has built up over the years with the insurance industry, which uses AARP mailing lists to market their policies.

Of course, it is the working class that will take the brunt of this attack. In response, the AFL-CIO has organized a few token demonstrations of a few hundred people—in other words the unions’ top apparatuses and their staff—usually in front of companies that would benefit from privatization, like Charles Schwab. Just like the Democrats, the top union leaders pretend that the issue is privatization—when the real issue is the wide range of attacks that both parties are preparing on Social Security.

Despite the opposition, worry and anger amongst their own members, the unions of the AFL-CIO have done nothing to mobilize any part of the workforce, nothing to allow the workers to show their anger, nothing to warn the Republicans and the Democrats to leave Social Security alone.

This is not an accident or an oversight.

The reality is that the AFL-CIO, and its member unions, do not oppose this attack on Social Security, any more than the UAW today opposes the reduction in auto workers’ medical coverage. They don’t challenge the official warnings about how Social Security will run out of money in 2041, and therefore won’t be able to pay all their benefits, just like the UAW doesn’t challenge GM’s claims to be broke today, while it is sitting on a total of 58 billion dollars in cash and stock. When top union leaders say that Social Security has to be fixed and strengthened, but don’t challenge any of the proposals coming out other than privatization, they are providing the justification for higher taxes, lower benefits, and longer working time—that is, more sacrifices. This opposition to Bush’s loony plan to privatize Social Security is just a cover for supporting the real attack being prepared on Social Security.

What is worse, when Bush backs off on privatization of Social Security itself, the unions will echo the Democrats in declaring a victory—thus greasing the skids to push through the real attack on Social Security.

Once again the AFL-CIO is proving itself the loyal partner of the bourgeoisie and the ally of the Democrats, which means they are doing the bosses’ dirty work from inside the working class.

The Real Problems with Social Security

The real problem with Social Security is not that it is too "generous," as everyone would like us to believe. No, Social Security is not nearly "generous" enough!

Take the Social Security benefits. Today, the average Social Security benefit is $955 per month. And that is an average, which means that a big part of the population gets much less. When Medicare B premiums, which are now $78 per month, are deducted, the average monthly benefit check comes to less than $900 per month. This not only has to pay the rent, food, and everything else, but also all the added expenses that people incur when they get older. And given the fact that fewer people are getting private pensions, more and more people are having to depend on Social Security for most of their income. According to the Social Security administration’s statistics, 33% of all seniors rely on Social Security for at least 90% of their retirement income, 66% of all seniors rely on it for more than half their income.

That’s why an ever larger number of elderly are being forced to work later in life—because Social Security is inadequate.

If the current attack on Social Security goes though, it will return even more of the elderly almost back to the days before there was Social Security, when a big portion of the population lived out their last days in misery! This is the real sense of what is being discussed—as if it were a serious, reasonable proposal—not only by the politicians, but by the union bureaucrats, the senior advocacy groups and the liberal academics.

Yet right now, the wealth exists to allow people to retire much earlier, not later. The official retirement age (which they want to push back) was set at 65 in the 1930s, in the middle of the Depression. Since then, the workforce has become many times more productive, creating enormous amounts of wealth. This productivity, this wealth could make it possible for everyone—and not just the wealthy—to retire much earlier, not just at 60, but 50, and at the same time with a decent benefit that includes full medical coverage.

The problem is not a lack of wealth in this society, preventing a decent retirement for everyone. The problem is who is getting the benefit of the wealth produced today. And over the last few decades, not only has the working class not increased its share of the wealth that it produces, its share has been getting progressively smaller.

The problem is not economic, but political. Over the last few decades, the capitalists and the politicians serving them have tried one attack after another, checking to see what they could get away with. When there was a response, like the strike of the UPS workers that reached out to other workers, they backed off a bit. But they have never stopped testing to see what they can get away with. And the fact that they got away with the Social Security "reforms" of 1977 and 1984 has emboldened them today to try a much bigger attack.

This attack has been carefully prepared to get us to swallow it without a protest, including by dangling privatization in front of our eyes as the only problem. The worst thing would be to let ourselves be fooled by this bait-and-switch trick. If Bush pulls it back, we won’t have time to breathe a sigh of relief, because that will be the sign that a much bigger attack is coming, all the cuts we’ve just talked about.

Of course, this attack might finally provoke a response, that is, an explosion by the population. Bush has already discovered that his "mandate" has gotten a little tarnished.

Social Security may still prove to be "The Third Rail of Politics"—and not just for Bush, but for everyone who tries to push through this attack, including the leaders of the unions.