Debate rages about the fate of Social Security

America’s high-profile debate about Social Security continued in March, with President George W. Bush still touring the United States touting his proposal for privatizing Social Security, and Democrats, labor unions and AARP countering him at every move.

In the U.S. Senate, debate broke out March 15, and a series of non-binding resolutions suggested that Bush’s plan could have a tough time winning passage. Later, members of Congress home for a spring recess continued to hear from constituents about the issue.

And financial corporations that have backed Bush’s plan continued to face noisy demonstrations organized by the AFL-CIO.

More than four months since he announced Social Security privatization would be his top second-term priority, President Bush still hasn’t committed to specifics, or backed a specific bill, despite the fact that two such bills have been introduced in Congress, one in the House and one in the Senate.

Bush’s proposal, in general terms, comes down to this: Workers under 55 would have the option of diverting a gradually increasing portion of their Social Security taxes into private individual accounts that would be invested in stocks and bonds. Any money they diverted they would later have to pay back to the government with interest, and however much their investment account grew, most workers would have to use it at retirement to purchase a fixed-income annuity from a private insurance company.

On top of that, Bush proposes to change the formula by which benefits grow over time, in effect cutting benefits by one-quarter by 2042, and nearly one-half by 2075. Also, under the Bush plan, any money workers chose to divert would have to be made up for by borrowing. It’s estimated the government could have to borrow up to $2 trillion to fund this “transition” cost.

On March 15, the U.S. Senate held a series of votes that functioned as a kind of “straw poll” of the opinions of the senators. Senators were in unanimous agreement that there is an “urgent need for legislation to ensure the long-term viability of the Social Security program.” But only 56 senators agreed that “failing to address the financial condition of Social Security will result in massive debt, deep benefit cuts and tax increases.” And the vote was very much along party lines, with all but two Republicans agreeing with that statement and all but two Democrats disagreeing.

The third resolution, sponsored by Florida Democrat Bill Nelson, was the most revealing. “Congress should reject any Social Security plan that requires deep benefit cuts or a massive increase in debt,” the resolution stated. This time, all Democrats, plus five Republicans, agreed, while 50 Republicans disagreed. Since the president’s plan would require deep benefit cuts and massive borrowing, the tie on the Nelson resolution could be interpreted as evidence the president’s plan, as now described, would have a tough time making it through the Senate.

On each measure, Oregon’s two senators voted with the majority of their parties.

Congress took its spring recess March 21 through April 3, and many Democrats held further “town hall” meetings to hear what their constituents back home think about Social Security. Republicans were cagey about the issue, after earlier meetings during a late February recess.

Oregon U.S. Representative Greg Walden (R-2nd District), has thus far not said whether he supports the president’s plan. Carol Bennett, secretary-treasurer of the Southern Oregon Central Labor Council, is a Central Point resident and a Walden constituent.

Bennett was part of a delegation of unionists and seniors that visited Walden’s Medford office March 24 to ask “Where’s Walden” on the issue of Social Security privatization?

Walden’s staffpeople gave the delegation a written statement in which Walden said something must be done to fix Social Security, but committed to no specific proposals. That wasn’t good enough, Bennett said. “We need to let him know he’s not going to get by with sitting on the fence.”

Their visit came one day after the Social Security trustees released their annual report March 23. The latest report moves their projections of Social Security insolvency closer by one year. The trustee’s projections have fluctuated every year based on demographic and economic changes. The newest report contains an “intermediate” projection that the Social Security trust fund, which is currently in surplus, will be depleted in 2041, at which time benefits would have to be cut 25 percent — if no action is taken between now and 2041. The Congressional Budget Office, using similar calculations, obtained a different result — 2052 in its most recent analysis.

Supporters of the president’s plan, including Social Security trustees like Treasury Secretary John Snow, used the new figures to argue that Social Security is in crisis. Meanwhile, opponents responded that the looming cuts are at least 36 years away, which plenty of time to make the modest adjustments needed.

Financial corporations have been covertly backing ad campaigns in support of Bush’s privatization proposal. But they are now finding that in supporting privatization, they may risk losing the business of union and public pension funds.

In a March 22 vote, the board of the Vermont State Teachers Retirement System, issued a warning to investment fund managers. The board, which oversees investment assets valued at over $1 billion, resolved that in the future it will “carefully consider the activities and involvement of investment firms in efforts to promote privatization during the selection and retention process of such firms.”

The national AFL-CIO has been keeping track of Wall Street firms’ privatization support on the Web site wallstreetgreed.com. The labor federation has also been targeting individual companies for demonstrations.