Clinton joins attack on Social Security
by Tom Condit
May 16, 1998
Just as the Social Security Board of Trustees released their April 28 report showing that the system was in better shape than last year's gloomy predictions, President Clinton jumped on the bandwagon of letting Wall Street loot the funds.Meanwhile, the media keep repeating that the system will be "bankrupt" in 2030, leading people to think that there will be no social security payments after that year. This is an ignorant error on the part of reporters and a flat lie on the part of conservative politicians.
In fact, even if the wrong projections about the economy the Trustees' report is based on came about, the system can pay full benefits until 2032 and will still be able to pay over 2/3 of promised benefits in the year 2070 (when most people reading this article will be dead). That is, unless the Repugnicrat politicians succeed in rendering the social security funds insolvent by diverting their money into the stock market.
How Social Security Works
The Social Security system pays retirement and survivor benefits to 90% of the elderly in the U.S., survivor benefits to nearly four million children, and disability benefits to hundreds of thousands more. It's financed by a flat rate tax wages up to $65,400 a year, paid equally by workers and employers. The money is invested in U.S. treasury bonds, the same "T-bills" invested in by many rich people and private pension funds.How much money goes into the funds each year depends on how many people are working and how much they make, and how high the interest rate on treasury bonds is. How much goes out depends on how many elderly people and disabled people there are. If there's high unemployment and low wages, the funds get less money. If employment and wages go up, they get more. This means the best guarantee of social security is a healthy economy. As Randy Silverman put it in Partisan No. 10:
"If the federal government adopted policies to foster higher rates of growth or employment the Social Security crunch would never materialize."
Where They Get Their Figures
People who take care of other people's money are supposed to be cautious. The Social Security Board of Trustees has carried this to an extreme. They assume that the percentage of old people will continue to grow, that there won't be any new immigrants entering the labor force, and that the economy will grow by only 1.4% per year in the future (less than it grew during the Great Depression of the 1930s). The first assumption is probably true, the second is absurd and the third implies that U.S. capitalism is at a dead end. That could be true, but it's certainly not a good reason to put your retirement money into the stock market instead of treasury bonds.Look at the figures: if for the next 75 years the economy grows at only half the rate it grew for the last 75 years, then by 2021, the funds will need to start selling treasury bonds they have to meet full benefits. By 2032, if things haven't improved, they'll need to start reducing benefits to keep afloat. By 2070, those benefits will be down to about 68% of they ought to be.
Why Not Tax the Rich?
We don't even know if this problem is really going to exist, since if the economy matches its 1973-94 average growth rate of 2.4% the fund will have a big surplus instead of a deficit. This year's Trustee's report put off the date when the system would be in trouble by three years because of one year of better-than-expected growth and income. But if it will exist, then the solution is to put more money into the Social Security trust funds. There are several ways to do this.We can raise the limit on incomes subject to the Social Security payroll tax to bring higher salaries into the fund.
We can raise the minimum wage and wages in general so that workers are making more money and can put more into the fund.
We adopt full employment policies to increase the number of people who can pay into the fund.
Or, we can make the rich and their corporations start paying to support the people whose labor made them rich. We can move back to a progressive tax system, slash the military budget, and put part of the money into Social Security and the rest into useful things like schools, health clinics and mass transportation.
The one thing which it would be totally stupid to do is listen to people who tell us to pour all our retirement savings into the giant Ponzi scheme called the stock market. If the economy doesn't grow, then sooner or later the stock market has to stop growing too. If they're right about how poorly the economy is going to treat us, then let's junk capitalism instead of social security.