Privatizing Social Security Is a Huge Attack on All Fronts

Feb 7, 2005

Bush has begun the big push for what he calls Social Security "reform," that is, the break-up of traditional Social Security program into individual, personal accounts. In his big sales pitch, Bush claims that allowing people who pay into the system to invest a big chunk of their Social Security savings in corporate stocks and bonds, they can make much more money for retirement.

Never mind that in his State of the Union address, Bush admits that he wants to cut Social Security benefits through a variety of ways, including by "increasing the retirement age," "discouraging early collection of Social Security," and "changing the way benefits are calculated"–as well as by reducing cost-of-living protection. Never mind that the Bush administration aims to slash benefits by more than 40%!

No, the Bush administration insists that this won’t be a problem–if his Social Security reforms go through. On the contrary, he says that people will come out ahead and have more money to retire on.

Of course, this is total nonsense, nothing but a promise that people can get something for nothing. Even some Wall Street professionals, in rare moments of candor, point this out. "The entire argument is absurd," said William C. Dudley, the chief U.S. economist at Goldman Sachs. "These returns aren’t free. You are getting these returns precisely because you are taking on risk."

In other words, the only way for people to have a chance to make the big gains that the Bush administration promises is to risk losing a big chunk of their retirement savings. They have a bigger chance they will lose their retirement money.

This is what happened to so many 401(k) and 403(k) individual retirement accounts that were supposed to be a replacement for traditional corporate pension plans. When the bubble collapsed, much of those employees’ hard earned savings disappeared. Even today, most of those individual accounts contain less than what people originally had put aside.

That will happen to many, many people if Social Security is privatized.

And that will be just the beginning. Another big chunk of the retirement money in private accounts will be eaten up by administrative costs. The Wall Street financial companies managing the accounts will deduct high fees and commissions for their services–no matter whether the accounts make or lose money. Moreover, the government will also set up an entire new layer of bureaucracy, which will gobble up more money.

Thus, Social Security "reform" will turn a relatively simple and inexpensively run system into a complicated, bureaucratic nightmare, requiring huge amounts of money–also paid out of retirement savings.

Yes, the current Social Security system has enormous shortcomings. People don’t get enough money from Social Security as it is now for retirement. But Bush’s "reforms" will do nothing but make it worse.

This attack is the first stage of dismantling a system that is a bedrock of income protection (social security) for a big part of the population. It regularly pays out benefits in good times and bad. As opposed to private investment accounts, which run out, Social Security benefits continue for the recipients’ entire lives. And, as opposed to even the best traditional private pension plans, it has some inflation protection built in, with annual cost-of-living increases.

If all this is taken away, many more seniors will be forced to work many more years, or live their last years in abject poverty and misery. It will turn the clock back more than 60 years, when senior citizens made up a big proportion of those living below the poverty line.

Working people cannot afford to allow the government, and the capitalists who are behind this attack, to take Social Security away from us. We have an enormous stake in stopping this attack.