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November 18, 2002

SS Privatization: GOP Deceptions

Go GOP social security privatizers!

Read this commentary today by former GOP Congressman Vin Weber from the Wall Street Journal. He's trying to argue that because some GOPers ran on private accounts in Social Security and won, that shows how much popular support there is for SS privatization. But the key phrase in his article is this one:

"They promised to preserve the benefits of all current retirees and those nearing retirement."

Which is a nice promise and when you bullshit the public, you often can get shortterm political gain. But read the sentence again. What is says first is that there is no promise that most working people paying into the social security system will get full benefits.

Second, if you take a big chunk of social security taxes and put them into private accounts, that means you have to use a chunk of income taxes or other general revenue to pay for current retirees.

So here is what social security privatization means for young workers:
(1) Your guaranteed benefits will be slashed and if your personal account goes south in an Enron-style mess, you will be eating cat food in retirement.
(2) While it sounds like free money, you will actually be paying for those private accounts through increased income or other taxes.
(3) Therefore, the scam is that young workers get to pay double taxation, for present retirees and again to cover the costs of their own accounts.

Cute bait and switch, huh? The GOP gets to sound all progressive and pro-young worker, when they really are screwing them as thoroughly as possible. Paul Krugman has long been skewering Bush over the deceptive math involved in these proposals.

The standard political story of social security privatization is that seniors will hate it politically, but that young people will be won over to the GOP on the issue. The actual politics is really the reverse. Most present retirees won't feel a thing, but younger workers are the ones who should be up in arms at the GOP playing these deceptive games with their future.

If you want the real story on Social Security privatization, you should look at the only real bill ever developed on the issue, the 1999 Archer-Shaw bill, one so embarassing in its results that the GOP has refused to actually present a bill in Congress since.

One gimmick of the Archer-Shaw bill was to officially keep standard benefits for retirees constant, while slashing them dollar for dollar for any stock market gains in the private accounts. As the Center on Budget and Policy Priorities (CBPP) notes:

[such an approach] is not likely to survive politically over time. This aspect of the plan effectively imposes a 100 percent tax rate on most accounts. After being told the individual accounts are their property, American workers would see their accounts entirely taxed away when they retired.

Seems kind of a strange game, to take money out of social security, put it into private accounts, then tax it away at retirement. Oh, but there's a point to the game, as CBPP argues:

The only group of retirees who could receive an increase in government-funded retirement benefits under the plan would be upper-income workers. Yet a broad array of Americans, including many of average or modest means, might have to absorb cuts in other benefits or services or tax increases to help finance the individual accounts after 2012.

Yep, that's the kicker. The deficit explodes paying for the private accounts and the only benefits get diverted to upper-income retirees who save so much that their stock market gains are larger than their lost benefits.

And the economic analysis by the non-partisan Employment Benefit Research Institute says it all about the likely budgetary results:

[I]f the equity market does not fair as well, and the costs of administering the accounts turn out to be larger than the proposal predicts, the chance that the proposal will achieve a positive actuarial balance is minimal.

That's a nice way of saying that the numbers don't even add up with the proposal.

There are other variations on social security privatization, but they are all based on lies and financial manipulations-- the end result being the same. The deficit increases, average folks lose out, and rich retirees are the only ones who benefit.

And let me repeat, the Dems have to get the politics of the issue straight. It's not old people who should be scared of the GOP plan. It's the young workers who will be double taxed directly and indirectly to pay for the damn thing, while risking having no retirement money.

The key here for progressives is to force the GOP to put up or shut up. Don't let them just talk about the wonders of "private accounts"-- make them present a real bill. These folks are getting cocky. We need to give them enough rope to go hang themselves. And when the average American voter sees who will foot the bill and who will benefit, folks like Vin Weber will be running for the hills from the backlash.

Posted by Nathan at November 18, 2002 09:26 AM

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