|
Comment on this article |
Email this Article
|
|
News :: Miscellaneous |
|
Warning to Bush: Don't Mess With Social Security |
Current rating: 0 |
by Mark Weisbrot
(No verified email address) |
01 Mar 2001
|
Mark will be in town!
*FIGHTING GLOBAL CAPITAL: A LIFE-LONG COMMITMENT*
*A PRESENTATION BY MARK WEISBROT*
***FRIDAY, MARCH 2, 6pm***
*** THE ILLINOIS DISCIPLES FOUNDATION***
The IDH is at the corner of Wright and Springfield in Champaign. |
George W. Bush seems to be cruising through
the opening months of his presidency with dumb luck,
much as he won the office without even winning the
popular vote. But there is one arena in which he is
playing with fire, and is sure to get burned: he still
thinks that he can get away with privatizing our
Social Security system.
Mr. Bush managed to get through the election
without paying the price for stepping on the famed
\"third rail\" of American politics -- probably because
most people didn\'t know what he was proposing. In
fact, a Harvard study of the electorate showed that
most voters could not distinguish between Mr. Bush
and his Democratic opponent, Al Gore, on any of the
issues, with the possible exception of prescription
drugs for Medicare.
But Mr. Bush has now reaffirmed his
commitment to creating individual private retirement
accounts out of the existing Social Security system, a
radical idea that even Ronald Reagan would not have
dared to put forward. If he continues down this road,
it is only a matter of time before the public
understands the threat that this poses to their
retirement security, and Mr. Bush and his party will
pay a political price for it.
Privatization would threaten Social Security in
a number of ways. First, it would add some trillions
of dollars of costs to a system that is currently
financially sound for the foreseeable future. This
would build pressure for benefit cuts in the future,
and undermine people\'s confidence in the program.
The additional costs are of two types: first,
there is the cost of transition. The 45 million
Americans that receive a monthly check from Social
Security are being paid from the taxes of currently
employed workers. To take away one-sixth of this
revenue and put it into private accounts would create
a gap that must be filled somehow -- most likely with
benefit cuts.
Second, there are the administrative costs
associated with managing 144 million individual
accounts. These turn out to be enormous -- 15 or 20
times the costs of administering the current program,
and enough to eat up as much as 20 percent of the
eventual returns from these accounts.
Of course, what looks like waste from the
point of view of the public is income from someone
else\'s vantage point: the Wall Street firms who would
haul in billions of dollars of easy money from
managing the individual accounts.
And that\'s what this privatization effort is all
about, in a word: greed. It is an appeal not only to the
greed of Wall Street but to a small, militantly selfish
part of the electorate that is willing to rupture the
bonds of social solidarity that have made Social
Security this country\'s most successful anti-poverty
program. They want to break the commitment that
each generation has made to its predecessors for the
past 65 years: to provide a basic social safety net in
their old age.
The Bush Administration does not put it this
way, but the reasons put forth in support of
privatization are patently false. First and foremost is
the urban legend that Social Security needs to be
\"fixed\" because the baby boomers will bust the trust
fund when they retire. But anyone with a computer
and a modem can go to www.ssa.gov and see for
themselves that Social Security is perfectly solvent
without any changes for the next 36 years, even
assuming quite dismal economic growth.
For those who worry about the science-fiction
future, the same consensus numbers show that the
shortfall for the whole 75-year planning period is
quite small -- less than three-quarters of one percent
of our national income. And now Alan Greenspan has
pointed out that even this much-hyped and grossly
exaggerated shortfall -- which was never anything to
worry about -- might disappear as economists take
into account the faster productivity growth of recent
years.
Privatization, which would actually worsen
Social Security\'s financial solvency, has been sold as
a way of boosting the program by taking advantage of
the stock market\'s high returns. But here, too, there is
a false assumption: that stocks can deliver their
historic rate of return (on average, 7 percent after
inflation) regardless of how overvalued they are at the
starting point.
Guess again: the NASDAQ is down more than
50 percent from its peak last March. A lot of people
are already making changes in their retirement plans.
It seems that privatization is an idea whose time has
come -- and gone. George W. Bush would be wise to
take notice, and back off.
Mark Weisbrot is co-director of the Center for
Economic and Policy Research in Washington, DC.
He is co-author, with Dean Baker, of Social Security:
the Phony Crisis (2000, University of Chicago Press).
|
See also:
www.cepr.net
|
