AFL-CIO to battle Social Security privatization
The union movement is gearing up for a nationwide debate over President Bush’s call to privatize Social Security.
In the three months since Bush announced — two days after his re-election — that changing Social Security would be the top priority of his second term, he has yet to tie himself to any specific proposal.
But administration officials have confirmed that their plan would replace a guaranteed retiree income with an income that would rely on returns from investments in individual accounts. And Bush has pledged not to raise Social Security taxes or cut benefits.
Since current benefits are paid by current Social Security taxes, all the money diverted into these new personal accounts would have to be made up for somehow. Two trillion dollars is the most frequently cited estimate of how much would be diverted, and the presumption is that the Bush Administration would propose the cost be paid by federal government borrowing.
Critics are having a field day ripping holes in arguments for privatization, and the president’s supporters in Congress are nervous about the political consequences of proceeding with Social Security privatization.
They’ve asked the president to lead the charge and take the flak. The Bush Administration, in turn, has asked the monied interests that backed his re-election campaign to pony up more to pay for a marketing blitz that would win public support — and political cover — for the privatization plans. Part of the marketing plan is to change the term “privatization” to “modernization” because it polls better.
The most obvious source of funding is the financial sector. From account management fees, Wall Street brokerage firms stand to make astronomic profits — as much as $940 billion, according to one study by the University of Chicago Graduate School of Business. But the Wall Street firms find it hard to openly advocate privatization themselves, because they look so self-interested doing so. So they’ve created and funded front groups, and are expected to spend tens of millions of dollars lobbying Congress and marketing privatization to the public.
The marketing campaign has two components: Create the impression Social Security is in crisis, and persuade people that private accounts are the best cure.
Hearing statements by President Bush that Social Security will be “flat bust” in a few decades, it’s hard for critics not to conclude that he’s “flat lying.”
Currently, Social Security is in surplus — collecting more in Social Security taxes than it’s paying out in benefits. This surplus is a planned result of Social Security tax increases approved in the 1980s to ensure the system’s solvency in light of the approaching retirement of the baby boom generation. The surplus is collected in a trust fund, which is lent to the federal government at interest to use for other purposes. The government’s legal obligation to repay Social Security’s bonds is every bit as real as its obligation to repay its other bonds.
But since the fix was instituted in the ’80s, the Social Security trustees, appointed by the president, have changed the statistical assumptions they use to predict the system’s future solvency.
Specifically, they increased their estimate of medical breakthroughs that would cause people to live longer, and they decreased their estimate of how many working-age immigrants will come to the United States. Based on the revised assumptions, the Social Security trustees came back with an estimate that the trust fund would run out in the year 2042 — well after most baby boomers had passed away. Once the trust fund tapped out, if no change had been made to the revenue or expenses in four decades, the system would still have enough revenue from workers in the system to pay 70 percent of the income promised to beneficiaries.
That fact, critics can scarcely scream loudly enough, means that the Social Security is not in any meaningful crisis. And certainly it’s not a crisis compared to much more pressing crisis of Medicare program, where health care cost increases and the newly added prescription drug benefit are expected to outstrip Medicare tax revenues within a decade.
How, critics ask, can an Administration that has failed to take responsibility for today’s federal deficit (nearly half a trillion dollars a year) claim it’s concerned about a deficit that its own estimates say won’t occur for another 37 years?
To fight Bush’s privatization plans, the American Association of Retired Persons has launched a multi-million dollar ad campaign of its own.
And the union movement is planning a mobilization of members, using the same structure as was recently developed for the 2004 election.
The AFL-CIO is calling for people to sign an online petition, at www.aflcio.org, to defend Social Security against Bush's plans to privatize it.