by Randolph T. Holhut
American Reporter Correspondent
March 3, 2004
GREENSPAN HANDS DEMOCRATS THE PERFECT ISSUE
DUMMERSTON, Vt. -- I hope the Democrats write a thank you note to Federal Reserve Chairman Alan Greenspan in gratitude for handing the party a perfect and nearly foolproof campaign issue to bludgeon President Bush.
Appearing before the House Budget Committee, Greenspan said that President Bush's tax cuts for the wealthy should be made permanent, even though they will cost about $1.5 trillion over the next 10 years.
At the start of this decade, the Congressional Budget Office (CBO) projected a $5 trillion budget surplus by 2010. Thanks mostly to President Bush's tax cuts, that surplus has been turned into a projected $4.3 trillion deficit.
So how are those tax cuts going be paid for if they are made permanent?
Greenspan's answer: cut Social Security benefits.
If the Bush administration thinks that people will accept the idea that we must pay for the huge transfer of wealth to the very rich by cutting retirement benefits to future retirees, they're dreaming.
And if the Democrats don't jump all over this one, they're stupid.
Social Security is not causing the huge budget deficits that are being racked up by President Bush. The program is still in the black. By the Social Security Trustee's reckoning, there's enough money to pay all promised benefits through 2042 without any change to the system at all.
That's 38 years from now. Most of the baby boomers, the group that's supposedly is going to bankrupt Social Security, will be dead by then. And this estimate isn't based on the usual rosy numbers that the Bush team likes to base its economic assumptions upon. That forecast is based upon an average rate of growth of 1.7 percent - or roughly one-half of the average rate of the past three decades.
Despite years of lies about Social Security spread by opportunistic politicians and parroted a lazy, uncritical press, the reality is that the odds of Social Security going broke in 38 years are on par with the likelihood of the federal government ceasing to exist in 2042.
Of course, if more people knew this, it would much harder for the Bush administration to convince voters that privatization of Social Security is a good thing.
Part of the problem is that Medicare usually gets lumped in with Social Security in the "Social Security is going broke and needs to be reformed" arguments. The truth is that both programs are funded by separate taxes and that while Medicare is a financial mess, Social Security is solvent.
How solvent? For the fiscal years 2005-2009, the CBO projects a Social Security surplus of just over $1 trillion. Unfortunately, the rest of the federal budget is projected to have a $2.49 trillion deficit. Thus, the money that was supposed to be accumulating to fund the baby boomers retirement has been completely frittered away on tax cuts for the rich and the bogus "war on terror."
And that doesn't even address the serious funding crisis in the Medicare program, which is mainly caused by the rising cost of health care in the private sector. The U.S. spends almost double on health care than other industrialized nations, yet we have more than 41 million people without health insurance. But few in Washington want to tackle this issue. Their answer to the health care crisis is the same as their answer to just about every other problem - let the private sector handle it.
But the private sector isn't handling it. We can see how it is handling retirement. More and more employers have shifted the burden of providing for a retirement onto the backs of workers. Pensions have been replaced by 401(k) plans, where the employee assumes the risk and the responsibility for saving for retirement. If you are in a low-paying job or are in a workplace that doesn't offer a pension, you're in trouble.
By contrast, Social Security has been the federal government's most successful social welfare program. It has cut the elderly's poverty rate from about 30 percent in the 1970s down to about 12 percent today. But Social Security does more than pay for retirement. It also provides $12 trillion worth of life insurance - more than the entire private life insurance industry combined. Of the 44 million who get Social Security checks, 7 million are survivors of deceased workers; about 1.4 million are children. Another 5.5 million beneficiaries receive disability payments, which covers disabled workers and their dependents. Together, the value of this insurance is worth about $200,000 for disability coverage and $300,000 for survivors insurance.
This is insurance that provides an inflation-proof, guaranteed income. There is nothing on the private market that even comes close. And every worker in the private sector is covered. It's portable from job to job, unlike most employer-sponsored plans. The coverage isn't dependent upon a physical or a screening for risk factors, like private insurance. If you're employed and pay Social Security taxes, you're covered. And all of this comes at an administrative cost that's less than 1 percent of the payout, compared with the average 12-14 percent administrative costs of private life insurance.
Thanks to Social Security, you're guaranteed an income if you are disabled, elderly or a dependent of a deceased worker. It is perhaps the best example of government serving as a counterweight to the excesses of unfettered capitalism. Americans still overwhelmingly support this role for government, because most are smart enough to know that the free market doesn't always act in the best interests of the majority.
It is telling that for all the talk of the need to cut taxes, no one talks about reducing the Social Security payroll tax. That's because the burden of this tax falls heaviest on working Americans. The current tax is 12.4 percent of wages - half paid by the employee, half by the employer. All income up to $87,000 is currently subject to the tax. Any income above that, including capital income, is exempt.
The easiest way to keep building up Social Security surpluses would to make changes in the payroll tax. Making all income, including investment income, subject to the 12.4 percent tax would spread the burden for funding the trust fund to the two income groups that pay the least in proportion to their income into the system - the upper middle class and wealthy.
Unfortunately, there is little enthusiasm for this in Congress, since the money raised by the Social Security tax is used to paper over the true extent of the rising federal deficit and any attempt to expand it will prompt howls of outrage by the upper class. And the even-more cynical members of Congress think that starving Social Security will be the catalyst toward privatizing it.
We can't let the Bush crew get away with this one. Social Security isn't broken and there's enough money coming in to meet all of its obligations for the foreseeable future, as long as it isn't being wasted on lining the pockets the rich and a phony war.
If this isn't a foolproof campaign issue for Democrats, I don't know what is.
Randolph T. Holhut has been a journalist in New England for more than 20 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at firstname.lastname@example.org.