When President Franklin Roosevelt signed the new
Social Security Act into law on August 14, l935---seventy five
years ago this week---its benefits to the elderly and disabled
already faced a vociferous army of enemies. Social Security, the
enemy argued, would bankrupt America, ruin the work ethic,
weaken our characters, and put us on the road to socialism.
Their arguments proved false then, but are still alive and
flourishing today. And with the current electioneering
and fear mongering about the monster DEFICIT, we will
be hammered with the same old lies, ad nauseam.
Just five years ago, shortly after his election to a second
term, President George W. Bush addressed a folksy audience
regarding the "precarious state" of America's retirement
system. "If you're twenty years old," he announced, "or in your mid-
twenties and you're beginning to work, I want you to think about
a Social Security system that will be flat bust---bankrupt, unless
the U.S. Congress has got the willingness to act now. And that's
what we're here to talk about: a system that will be bankrupt."*
And how must Congress solve this "crisis", according to
Bush? By privatizing part of your payroll taxes and investing them in
stocks or individual retirement accounts. This has been the
holy grail of the insurance corporations and Wall Street brokers
since the beginning of Social Security in the Great Depression...
the stock brokers can visualize the fees those trillions promise.
Fortunately, Congress did not take Bush's advice, because
less than four years after that address, the U.S. stock market
imploded and the Great Recession of 2008 rolled into high gear.
Millions of Americans lost a third or fourth of their investments,
and millions of others lost their jobs.
The enemies of Social Security use many devices for attacking it.
How about deliberately confusing Social Security
in the public mind with the financial crisis and its resulting budget
deficit? Only this past Sunday Rep. John Boehner, Republican House
Minority Leader, proposed raising the retirement age to 70 years!
And how would this improve the budget deficit today or
ten years from now? Not by a single nickel or dime. Nada.
Nor is Social Security in any immediate crisis needing urgent
changes, especially cutting benefits to retirees. Boehner is
creating an issue to befog voters in the upcoming elections.
Here's one fact we should all clearly understand: your payroll
tax, (Old Age and Survivors Insurance and Disability Insurance)
serves a completely different function from the income tax; they
are entirely separate tax programs. No changes in Social Security can
affect the deficit we fear so much today (but feared so little
when Republicans were the majority party in Congress).
We've been hearing for twenty years that Social Security has
gone broke, or is going bankrupt, or is only a pile of IOU's; that
the surplus has been frittered away by Congress on pork projects.
Yet, this past week the trustees of the Social Security Trust Fund reported
a $2.5 trillion surplus, surviving the worst economic downturn in the
program's history. The Great Recession and loss of payroll taxes will
require timely adjustments to Social Security, but the 75-year
projection of its fiscal future indicates it will survive going forward.
And that brings up another fact that must be perfectly understood.
The question is often jokingly raised: if the trust surplus isn't a pile
of IOU's, is it several tons of gold bullion? or millions of $100 bills?
The answer is No, of course; it's an accumulation of U.S. Treasury bonds.
Nearly all loans to the U.S.are transacted as bond purchases, (the
smart set calls this "buying U.S. debt"). Whether owned by China,
Japan, millions of private investors, or the Social Security Trust Fund,
U.S. bonds are gilt-edged, and guaranteed.
No politician would dare imply that the United States might default
on loans China made to the U.S. through the purchase of U.S.
Treasury Bonds, prized as the most secure investment on earth.
So why would the same politician declare that the U.S. will default
on treasury bonds held by the Social Security Trust Fund, a
retirement fund workers have paid into all of their working lives?
The answer is obviously "the politics of fear": to scare the hell
out of the voters, and make the friends of Social Security look like
political frauds. We can rest assured the Chinese government
knows that politicians and "experts" who say the trust fund is empty
are either joking or lying!
Who are the most vocal enemies of Social Security? Today they
are the libertarians of movement conservatism. Libertarian rage
against all "big government" programs is not so much
financial as ideological. They would return us to the Gilded Age of
William McKinley, before the personal income tax, before the Federal
Reserve, before Theodore Roosevelt broke up the
great monopolies of the robber barons. And especially before
the economic theories of the Keynesians and New Dealers
who advocated and launched the stimulus to fight recessions.
You'll get the libertarians' drift on any of the many blogs
of the Cato Institute, the Heritage Foundation, the National
Tax Payers Union, the American Enterprise Institute, Freedom
Works, Fox Cable "News", and dozens of other right wing
foundations, institutes, pundits, classical economists,
and talk-radio demagogues Rush Limbaugh, Mark Levin,
Glenn Beck, Sean Hannity, et al.
Here are some other facts you should bear in mind during the
continuing war against Social Security:
1) By 2023, Social Security will have a $4.6 trillion surplus. It can pay
out all scheduled benefits for the next quarter-century with no
changes whatsoever. After 2037, it will still be able to pay out
75% of scheduled benefits, and that's without any changes.
2) When changes are needed to "fix" Social Security, conservatives
will insist upon cutting retiree benefits, like the 70-year retirement
age suggested by Boehner above. It's good to remember that
money from the Social Security Trust Fund cushioned the $700 billion
Bush tax cuts to the wealthiest Americans. (Our grand kids will be paying
off that debt!) "Fixing" Social Security should come at the expense of
those who most benefited from the $106,000 taxable maximum. An
increase in that maximum could make Social Security sustainable for
decades to come.
3) Remember: the Social Security fund is separate from the budget;
it pays its own way. It can never add a penny to the deficit. Don't
let the wizards behind the right-wing fog machine confuse you during this
election campaign season.
*Read a detailed analysis of the Social Security program in the
excellent book "The Plot Against Social Security" by Pulitzer
Prize winning financial journalist Michael K. Hiltzik of the LA Times.
