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To save Social Security, Bush wants to destroy
it. And, in doing so, it would require the
government to borrow at least $2 trillion to make
up the immediate shortfall. However, the Social
Security System is not only solvent, it's in much
better shape than the rest of the federal
government. "The people who hustled America into a
tax cut to eliminate an imaginary budget surplus
and a war to eliminate imaginary weapons" Paul
Krugman wrote recently, "are now trying another
bum's rush."
If you're twenty now, you'll be hitting
retirement around 2052. That's the year
the Congressional Budget Office says the trust
fund will run out. In fact, many economists say it
may never run out. If the economy continues to grow
at an average rate, the trust fund could quite
possibly last forever. Even if the trust fund does
run out, Social Security will still be able to pay
eighty percent of promised benefits. Once the whole
baby-boomer generation is into the retirement pool,
Social Security's share of the gross domestic
product will only increase by about two percent.
President Bush's tax cuts are more than two percent
of GDP, and they're happening right now, not fifty
years from now. On the day the trust fund is
exhausted, Social Security revenue will cover about
eighty percent of the cost of benefits. Right now -
today - if you look at the U.S. government outside
of Social Security, revenue covers only about
sixty-eight percent of total government spending.
So on the day the trust fund is exhausted,
forty-seven years from now, Social Security will be
in better financial shape that the rest of the U.S.
government is today. It is hard to understand why
anyone would want to return us to the days before
the New Deal, when millions of elderly people lived
in poverty. Social Security is the biggest
social-insurance program that we have. It's been
highly successful, and it's extremely popular. It's
one of the things that makes people feel somewhat
good about government - and so, therefore, it must
go.
Wall Street poured a lot of money into both of
Bush's campaigns, hoping he will divert Social
Security into the stock market. First, the fees
charged on private accounts will be a significant
drain on returns. In a typical portfolio, we're
probably looking at a return of four percent. But
fees are likely to take at least one percent, like
they do in Britain. And since Bush wants to borrow
$2 trillion to pay for the transition, we're
talking about borrowing at interest rates of three
percent to establish private accounts that will
yield three percent - with a lot of additional
risk. So it's a lose-lose proposition, except for
the mutual fund industry. The second problem with
the market is that some people - probably many
people - will end up getting much less than they
would have under the current system, depending on
which funds they pick and how the market does. A
lot of people will hit age sixty-five with very
little in their private account - and that means a
big return of poverty among the elderly which is
exactly what's happening in Britain right now.
The only possible way that stock returns can be
high enough to make privatization work is if the
U.S. economy grows at three to four percent a year
for the next fifty years. But Social Security's own
trustees expect the economy's growth rate to slow
to 1.8 percent. If that happens -0 if their own
assumptions are correct - then privatization would
be a disaster. And if that doesn't happen - if the
economy continues to grow at a steady rate - then
the trust fund is good for the rest of the century,
and we don't need privatization.
Social Security is simply not the biggest
problem facing the government today. If you really
want to get scared about something that can happen
between now and 2052, you should talk about
Medicare and Medicaid. The entire system of private
health insurance is gradually collapsing. In our
system, we have huge administrative costs - which
are mostly driven by insurance companies spending
huge amounts of money trying to avoid covering
people. Our healthcare costs are eighty percent
higher than those in other advanced countries. The
best way to contain those costs is to go to a
single-payer system, one in which the government
insures everyone. That would probably cut the cost
of health care by at least twenty-five percent.
However, Bush actually wants to do the opposite. If
he manages to privatize Social Security, he'll try
to privatize Medicare next. The right says that
what we need is more choice, more competition. But
every piece of evidence suggests that health care
is an area in which privatization actually raises
costs. If they succeed, then we're pretty much
back, on domestic policy, to the days of
Warren Harding - which is exactly where they
want to go.
Source:
Excerpts
from the 1/27/05 issue of Rolling Stone
Related Topics: Social
Security
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