Social Security continues to be under attack from private interests who want to use your SSI payroll contributions and risk them in speculative ventures that may or may not succeed. For most Americans, gambling with their retirement savings can have serious consequences at a time when financial security is most vulnerable.
The anti-government crowd headed by anti-tax advocate Grover Norquist wants to dissemble a secure retirement program and have you put your faith in a system that is often quite similar to casino gambling. You could walk away comfortably rich or you could walk away with nothing but the clothes on your back. To encourage this they are using the nation’s deficit structure as a fear-mongering tool to intimidate poorly informed Americans and direct them to make a choice that will assuredly benefit them and enhance their wealth at even greater levels while making no guarantees how your results will end up. As an added measure to persuade you, they would argue that Social Security is on the threshold of bankruptcy. The truth is quite different but there are issues with this system that can be easily fixed if only wealthy interests would quit creating obstacles to make such improvements
The hue and cry from the extreme right within the GOP is that public sector spending needs to be cut back to reduce the deficit. This itself is a political smokescreen that appeals to that austerity crowd who want continued cuts in social welfare programs while leaving a bloated defense budget untouched, along with leaving the Bush tax cuts for the wealthiest 2% in place.
The GOP has its sights on changing Social Security as we know it to correct it’s deficiencies while eliminating its impact on the deficit, or so they claim. But does Social Security dramatically affect the deficit? The CATO institute, a Libertarian think tank founded by billionaires Charles and David Koch, thinks it does. They have put some numbers together to support their contention. But there are equally creditable organizations who show a different story and point to the Bush tax cuts and the two wars in the mideast having the biggest affect on our growing budget. Dean Baker with the Center for Economic and Policy Research also points out something missing in the deficit hawk’s argument.
Under the law, Social Security is financed by a designated tax, the 12.4 percent payroll that workers pay on their first $107,000 of income each year. The money raised through this tax is used to pay benefits. Any surplus is used to buy U.S. government bonds. All funding for the program comes either from this tax or from the bonds held by the program’s trust fund. (The Social Security system is also credited with a portion of the income tax paid on Social Security benefits.)
Social Security is prohibited from spending any money beyond what it has in its trust fund. This means that it cannot lawfully contribute to the federal budget deficit, since every penny that it pays out must have come from taxes raised through the program or the interest garnered from the bonds held by the trust fund. SOURCE
What seems clear to a layman like myself is that projecting the future for a program so large as Social Security is not any easy task and we are dependent on the experts to give us an honest assessment of this important retirement resource for millions of Americans. We need honest, objective analyses that utilizes all data and not studies subjected to ideological dogma. Creating choices that fail to take in all considerations does a disservice to a public that is forced to trust those who are supposed to have the aptitude for such things. I like to gamble as much as most people do but when it comes to a retirement fund needed to meet my needs in old age, I don’t want to wake up one morning like many did in 2008 to find they lost most of their savings to a system that gambled on unsure bets.
What’s at stake here is a system that has served this country well for 75 years keeping many people from falling below poverty levels. It serves as a back up for those people who worked hard all of their life and still were unable to put enough away on their own to sustain them through old age. Raising a family with costly health care needs and equally costly education expenses makes the ability to set enough aside with wages that have been shrinking for several decades difficult if not impossible for some. Since the cost of living doesn’t ever really go down it is important that wages keep pace with the cost of goods and services.
The record shows that this hasn’t happened for the large majority of working families in this country. Since the 1980’s wages have been stagnant in comparison to wages for the top 1% of wage earners while the costs of goods and services continue to rise. As a result, pensions have been diminished and in a lot of cases lately, eliminated as businesses find ways to keep their profits on track. Income revenue for most Americans no longer allows people to save as they once did.
Social Security thus becomes essential in keeping many people from starving and succumbing to illnesses easier from lack of adequate health care once they lose their ability to work. It’s a system that a humane society put in place following the Great Depression of 1929 and has saved millions of lives. Each month a portion of one’s paycheck – 6.2% – is deducted and matched by their employer to pay in to the Social Security trust fund. Until 2010 there has been a surplus from this source to pay benefits for retirees who claim these benefits in old age. The economic disaster that occurred at the beginning of 2008, resulting from excessive risky investments by banks too big to fail sent the economy into a nosedive, creating massive jobs losses.
These job losses took with them the payroll deductions that are used to pay benefits to SSI beneficiaries causing the shortfall in 2010. But many of those years collecting revenue had surpluses. This money was set aside by purchasing U.S. treasury notes to cover Social Security in times when intakes didn’t match outputs. To the hoot and holler of many this most recent shortfall means doom for the system. It’s a scare tactic that’s been around almost since the inception of the program back in 1936.
Wealthy financial corporate interests in this country have been jealous of the fact that so much money has alluded their grasps all these years and have attempted to squeeze the life from this program so that they can access such funds for their own self-interests. And though there is something to be said for the larger returns many might see over the years by investing this money in private financial markets, there is also much evidence to weigh that shows how such a move could actually hurt more people than it helps.
Social Security sets a specific amount aside and let’s simple interest enable it. It is not put into risky investments that may show high returns one year but then go belly up the next year. Organizations like the CATO Institute, the Heritage Foundation and wealthy individuals like Peter Peterson who want to privatize Social Security like to point out that “despite recent declines in the stock market, a worker who had invested privately over the past 40 years … would retire with more income than if they relied on Social Security.” What is concealed here however is that if you retired in January 2008 you would have lost half of that retirement in just a few short months as a result of the stock market crash that saw the Dow Jones go from an all time high of 14,100 on October 9th, 2007 to hit a a low of 6,547.05, a 53.78% loss over a period less than year and one that had not been seen since November 25th 1996. Social Security recipients on the other hand saw no change in their benefits.
Herein lies the devil within the details. Those who seek to end Social Security as we know it do so NOT because it’s an unworkable system but because it is so effective and they are losing out on money that their capital ventures would create for them. But under this Superman Cape of “free markets” is the reality that the values of your stock are subject to the volatility of the markets and if they collapse as they did in 2001-02 and 2008 at the time you decide to retire, then your net worth may in fact be much less than someone who is collecting social security. They don’t call it Social “SECURITY” for nothing.
Now, are there problems that could prevent benefits from continuing as they have for 75 years, including COLA increases each year? With a poor economy, a continuing high war debt, large numbers from the baby boom generation retiring and revenue cuts from lower tax rates, of course there is. The fact that the government decreased the amount of the payroll tax by 2% in 2011 to help struggling income earners hasn’t helped either.
But killing this system as we know it and turning it over to private venture capitalists and their cronies in those banks too big to fail is a gamble that will ultimately hurt many low and middle-income families whose wages will never reflect what their parent’s did in the 1950’s, 60’s and 70’s. Unless we address the serious issue of income disparity in this country, the belief that the free markets prop us up in our retirement years is as unlikely as it is to believe that homeownership is more of a reality now than it was a generation ago. Both possibilities have suffered at the hands of people whose self-interests are focused on profits – not your long term needs.
Congress can fix Social Security in one of two ways long before it reaches a state where full benefits have to be cut back in 2036.
- Eliminate the cap on the payroll tax on income above $250,000, or
- Reinstate the Bush tax cut on the top 2% of American income earners.
Either one of these quick fixes would eliminate any real or imagined threat to Social Security. As for the deficit – President Obama has put forth a budget that would reduce annual deficits, “through his proposals to raise $1.5 trillion over 10 years mostly from the wealthy but also from closing some corporate tax breaks, chiefly for oil and gas companies.”
There is plenty of room to find resources necessary to reduce the deficit without touching the Social Security trust fund, especially during these economic hard times. By making deficit reduction the focal point of their 2012 campaign on the backs of the elderly and dependent children while job losses remain high, the Republican Party has informed low and middle-income retirees and wage earners who their real constituency is.