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Received this in my email today from the Gray Panthers of Kansas and Western Missouri. This information will help to dismiss right-wing lies: Why would a Wall Street billionaire, hedge fund mogul like Peter G. Petersen want to politically destroy Social Security? The answer to this is rather simple and obvious. Social Security is the only major government program around which Wall Street has not been able to wrap its tentacles and suck massive amounts of money from the American masses.
As opposed to Medicare, the Pentagon, the Department of Homeland Security, and practically all other major government operations, Social Security engages in no regular, major, highly profitable (think cost-plus) contracts and invests all of its funds in U.S. Treasury bonds. It provides no opportunities for profiteering by the likes of the financial-industrial, medical-industrial, military-industrial, and other other-industrial complexes.
According to the 2010 Social Security Trustees report, the cost of administration of the fund costs less than 1% of revenue (page 3). The fund currently has $2.5 trillion invested in Special Issue U.S. Treasury Bonds. This safe investment is returning 4.9% interest. Hence, the fund is expected to grow to around $4 trillion by 2024. It is not hard to understand why Wall Street would like to see privatized Social Security in which workers’ Social Security funds are funneled into 401K type accounts.
The financial services industry is dreaming about the high management fees to be made on 401k accounts and all of the money that could be pumped through labyrinth financial operations such as Goldman-Sachs, the Carlyle Group, and the whole host of hedge funds and investment firms. As it is now, Wall Street gets no Social Security dollars – none, zip, nada, zero. The Peter G. Petersen’s of the world will not quietly stand by and watch this pile of money sit in a safe fund.
They want it and have a strategy for getting it, which involves spending huge amounts of money on vile propaganda. Strategy number 1 is to claim that the U.S. Treasury Bonds purchased by U.S. workers and their employers with 12.4% of payroll (up to $106,800) are worthless – just IOUs and not really redeemable. Just think about that for a minute. Politicians, journalists, etc., etc. are stewing and fretting and worrying about bonds redeemable to sovereign wealth funds (e.g. China, Saudi Arabia, Dubai, etc.) but summarily dismiss bonds purchased by U.S. workers as worthless.
Strategy number 2 – related to strategy number 1 – is to claim that the Social Security system is bankrupt or rapidly going broke. Here is the truth: “Interest earnings on the trust fund assets alone will be sufficient to cover annual difference between cost and tax revenue until 2025” (2010 Social Security Trustees Report, p. 3). In 2009, the total income of the fund was $807.5 billion and expenditures were $658.8 billion. The net increase in the fund was $121.7 billion (2010 Social Security Trustees Report, p. 5).
It is indeed the case that by around the mid 30s, the fund will be running a 25% deficit. This can be easily corrected. For instance, initially, Social Security payroll taxes were designed to cover 92% of taxable payroll. Due to congressional neglect and stagnant or dropping middle-class income and rapidly increasing upper class income, this has dropped to 83%. The cap of $106,800 of pay taxed under Social Security must be raised now!
Strategy number 3 – is to claim that Social Security is one of the biggest causes of an increasing U.S. deficit. Here is the truth: Social Security gets no money from the general fund – none, zip, nada, zero. By law, Social Security is off budget. And, by law, cannot be utilized in calculations of the deficit and/or the debt (Budget Enforcement Act of 1990). Furthermore, it is a social insurance system with a dedicated payroll tax – benefits paid out cannot exceed funds available from revenue (tax and interest). The trust fund cannot run a deficit. This is known as a “pay go” system.
We will not deny that the Social Security system is facing long-term financial threats. It doesn’t help that President Obama has cut the employee portion of the payroll tax to 4.2 percent from 6.2. Now he wants to extend the cut and also cut the employers’ portion. This is a bad idea and displays a lack of sensitivity to the retirement security of U.S. workers. This hit on the fund needs to stop – now!
We will not deny that demographic changes in the next 50 years will put stresses on the system. Instead of the current three workers for every employee, the ratio will level out at 2 workers for every retiree by 2040. However, productivity – defined as the ratio of output to input – has been increasing and will continue to increase due to less payroll needed for each unit of output. Consider this: the new Oakland Bay Bridge, paid for by California taxpayers, is being built in China and shipped to the United States. How’s that for an infrastructure jobs program? Let’s rebuild America – in China!
Chinese workers on the bridge project make 60 cents per hour, work 12 hours a day, 7 days a week, and live in dormitories. Along with shipping work overseas, jobs are disappearing because of robotics and other forms of cybernation. Hours of taxable payroll are also disappearing because of the current recession (yes, we are in one) – caused by irresponsible and collusive government-industry greed.
Workers didn’t cause the recession or waste $trillions on war and bailing out the financial services industry. But these economic realities concern us because we are expected to take the hit for them. One thing we can do is not let propaganda pass unchallenged in our local newspapers or on radio and television. Also, we should challenge friends and colleagues when they repeat the propaganda designed to sink the Social Security system.Don't have a link to this article, but here's a link to the organization: Gray Panthers of Kansas and Western Missouri |
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