Here's the real crisis
Clinton tries to hand Social Security to Wall Street
By
John Catalinotto
President Bill Clinton has done it again.
Just as he "reformed" welfare by cutting it to the bone, he
plans to "save" Social Security. In a move that will benefit
only the very rich, he has opened the door for an all-out
attack on the vital and widely popular program.
Some Wall Street spokespeople like Federal Reserve chair
Alan Greenspan have criticized Clinton's program. And
right-wing think tanks want the financial corporations to have
even more access to Social Security funds than Clinton is
proposing.
But no one should be confused by this. Clinton is no savior
of Social Security. He has started the process of attempting to
open up this vital fund to be used for Wall Street
speculation.
In his Jan. 19 State of the Union message, Clinton proposed
using part of the expected surplus in the Social Security fund
over the next 15 years to invest in the stock market. The
proportion he proposes amounts to $700 billion, a hefty amount
but still only a small portion of what the Wall Street brokers
want to get their hands on.
The details of Clinton's proposals are not as important as
the class battle they open. This is the real crisis for Social
Security. Will the mass organizations representing the working
class, like the AFL-CIO, as well as retired people's groups,
wage the struggle needed to save the system from this Wall
Street attack?
The first step in this struggle is to examine what Social
Security is exactly and to dispel all the myths caused by
ruling-class propaganda, especially the myth that it is headed
for collapse unless drastic changes are made.
Won in struggle
Like welfare, union rights and unemployment insurance,
Social Security was won in working-class struggles in the
1930s. All these progressive programs came under heavy attack
in the 1980s during the Reagan administration. The attacks
became more virulent in the early 1990s after the breakup of
the Soviet Union weakened the working class worldwide.
The right-wing attack on welfare struck at the most
vulnerable section of the population--mostly the poorest women
and children, and including many people of color. Anti-welfare
propaganda was combined with the usual vicious racism.
Finally, Clinton himself signed the anti-welfare bill into
law during his 1996 re-election campaign.
But it was hard for the right wingers to attack Social
Security head on. The program benefits everyone who has worked
and reported earned income. While the minimum income it
provides the lowest-paid workers is barely enough for survival,
the program as a whole benefits the vast majority of the
population. At present over 40 million people are receiving
Social Security retirement payments and another 8 million
receive disability payments.
To take on this broad pro-Social Security bloc, its
right-wing enemies started a propaganda campaign that the
system was doomed to collapse. Thus, they argued, drastic
change was needed. And these groups, from Merrill Lynch
investment bankers to the ultra-conservative Cato Institute
think tank, started proposing the privatization of Social
Security in one form or another.
It's clear what Merrill Lynch wants. Wall Street wants the
$2 trillion to $4 trillion expected in the Social Security fund
by the year 2018. The brokerage houses and investment bankers
are drooling over an estimated $10 billion to $40 billion a
year they expect to get in brokers' fees by the year 2015,
according to a Jan. 7 New York Times estimate.
And even this vast sum assumes that the fees would be
limited to skimming 1 percent off the top. Privately the
bankers are counting on it being even more.
According to the AFL-CIO web site, the campaign to pry open
the Social Security fund has big money. The Cato
Institute--with 25 percent of its funding from Wall Street--"is
pushing its donors to contribute to a $100 million ad campaign
boosting privatization. The Heritage Foundation, another
conservative group that backs school vouchers and tax cuts for
the wealthy, also is asking its members to contribute to the ad
campaign."
The other groups the AFL-CIO mentions--the National
Development Council/Economic Security 2000, the National Center
for Policy Analysis and the Investment Company Institute--are
all right-wing operations. Some also push anti-affirmative
action initiatives, school vouchers for private schools,
massive tax cuts for the rich and privatized prison labor.
Their real goal is not to "save" Social Security but to
transfer more of its wealth into the pockets of the rich.
These groups have tried to build a climate of fear that
Social Security is in danger. Their argument is nothing less
than a gigantic hoax. But they have pushed two different
Clinton-appointed panels--first the Kerry Commission and in
late 1996 the Advisory Council on Social Security--to foster
the same hoax. And Clinton has now followed up with his
indecent proposal.
Social Security payments are funded through a special 6.2
percent tax that is applied only to the first $68,400 of a
worker's income. This is matched by another 6.2 percent payroll
tax paid by the boss. The worker's portion of the tax is
regressive, falling heaviest on those who can least afford it.
The vast majority of workers earn less than $68,400 a year, and
therefore pay a greater percentage of their income to this tax
than do those earning more.
However, the benefits paid out are also proportionally
greater for lower-wage workers. As the AFL-CIO report makes
clear, this makes Social Security even more important to those
workers who historically have been paid less due to employment
discriminationAmerican and Latino workers as well as all women
workers.
What's true, what's a hoax
Those claiming that a Social Security crisis is looming
argue that the baby boom generation--those born between the
years of 1945 and 1960--will start collecting retirement
benefits beginning in the year 2012. Using faulty calculations,
they say that this will make the fund run out of money. Their
solution is to invest the surplus in stocks, with greater or
lesser personal involvement in buying the stocks, or to
privatize savings.
It's true that in 2030 there are expected to be 788 people
collecting some form of Social Security for every 1,000
workers, while in 1995 there were only 710. But is there any
reason to think that this will create a problem?
Anyone who has worked with economic statistics--especially
projections over a long period--knows that a small difference
in an annual estimate of the rate of change can result in an
enormous difference at the end.
Such projections are always risky. But to be honest they
must at least be internally consistent.
Those pushing stock investment predict low gains in
productivity and wages--and therefore low payments into the
Social Security fund. They nevertheless predict high gains for
the already overpriced stocks. Thus they are perpetrating a
fraud as well as a hoax.
There is no reliable way to predict either wage or
productivity gains. And there is no certainty on what will
happen with the stock market. Even if there is no stock-market
collapse, as there was in Japan, their so-called solution is a
threat to Social Security.
What can be done?
If any real dangers to Social Security do exist, there are
some simple solutions that would solve them on behalf of
working people:
* Wall Street could help "save" Social Security by paying a
simple tax on stock transfers. There is still no tax on stock
transfers, a giveaway to the big financiers.
* A surcharge on all profits could pay for any deficit.
* There's a $68,400 cap on income taxed for Social Security.
Take off the cap and make all those in the high-income bracket
pay at the same rate as ordinary workers.
* Raise the minimum wage.
* Put the unemployed to work.
* Crack down on bosses who evade paying Social Security for
undocumented workers.
In other words, if a real problem does arise, there are many
ways for those who've profited off workers' labor to make up
any differences without endangering workers' retirement
benefits.
Laws making it simpler for unions to organize would go a
long way toward improving the wages at the lower end and also
increase Social Security taxes.
Of course, to put forth such a program requires a united
working-class struggle, and one completely independent of
Clinton and the Democratic and Republican parties.
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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