PEP, February 2005: Social Security. The phony crisis.

By GREGORY N. HEIRES

President Bush and his conservative allies are using scare tactics to generate public support for privatizing Social Security.

They want the American people to believe Social Security is going broke and can only be saved by Wall Street.

Don’t believe the hype.

A secret White House memo on selling privatization — leaked in January — says the trick is to convince the public that “the current system is heading for an iceberg.”

We went through this same cynical manipulation of public opinion when the administration used the bogus threat of weapons of mass destruction to start the war in Iraq.

A blatant lie
“President Bush is lying when he says that Social Security is ‘bankrupt,’ ” said Stuart Leibowitz, president of the Retirees Association of DC 37. “It’s like a person claiming he is starving with two loaves of bread under his arm. The system has over $1 trillion in reserves and can pay for the current level of benefits for decades.”

What the American people face is a dire political threat to their retirement security.

“The Bush Social Security plan poses a major threat to the economic security of future generations of older Americans,” said Kenneth Apfel, who served as Social Security commissioner from 1997 to 2001.

Despite White House denials, the scheme even imperils the monthly checks of current retirees, according to Apfel.

“The proposal destabilizes the financing base of Social Security, which could threaten the benefits of current beneficiaries, very possibly within a decade,” said Apfel.

By shifting trillions of dollars into individual investment accounts, the Bush plan would starve Social Security. The system now provides benefits to disabled workers and the children of deceased workers in addition to guaranteed retirement payments.

Individuals with the new private accounts would no longer be able to count on a guaranteed retirement income. They would gamble in the stock market with part of their Social Security payroll deduction. The leaked White House memo admits that Bush’s plan would slash benefits for future retirees. The traditional benefit would fall by more than 40 percent, according to government figures.

The only sure winners would be the Wall Street money managers who stand to make untold millions as they sock account holders with hefty administrative fees.

“Social Security doesn’t face a crisis,” said Gertrude Schaffner Goldberg, chair of the National Jobs for All Coalition, which is lobbying against the privatization plan. “To encourage privatization, its proponents have invented a crisis,” Goldberg said. “Privatizing would take money out of Social Security and create a shortfall that doesn’t exist now.”

Mark Weisbrot, co-director of the Washington, D.C.-based Center for Economic and Policy Research, describes Social Security’s finances as “rock-solid.”

The Social Security system is probably in better financial shape now than at any time since it was created in 1935 by President Franklin D. Roosevelt. That is partly because of a reform in the 1980s that set up a trust fund for reserves and slightly scaled back benefits.

A manageable problem
Although there is no crisis, there is a manageable problem that may require adjustments in revenues or benefits. The Social Security Administration projects that the current benefit will be completely funded until 2042, when the trust fund will be depleted, but current pay deductions would still be covering 75 percent of the scheduled benefits.

Weisbrot pointed out that the Social Security trustees based their prediction on historically low economic growth. Some experts believe little or no extra funding will be necessary if jobs and productivity beat projections and produce enough additional payroll taxes to cover the projected shortfall.

If added revenue is needed to address the shortfall, it would be less than the payroll tax increases adopted in the 1950s, ’60s, ’70s and ’80s, Weisbrot said.

Or the federal government could close the entire gap and make the system fairer simply by eliminating the current $90,000 cap on income subject to the payroll tax.

With the debate over the future of Social Security heating up, Mr. Leibowitz said active workers — the ones who stand to lose the most — should press politicians to oppose the Bush plan.

Concerned workers may reach their U.S. senators and representatives in Congress by using the toll-free number (800-846-8610) of AARP, an advocacy group for the elderly.