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‘Saving’ Social Security
Hands Off Social Security!
By Destroying It?

A look behind the Social Security Privatization Rhetoric

Social Security — easily the most popular government program in U.S. History — is under attack by those who claim the system is in trouble and must be dramatically reshaped before 'it goes  broke.' Is Social Security really in trouble — or is there another agenda behind the rhetoric?

We want to save Social Security," claims Sen. Rick Santorum (R., Pa.) But in fact, what he and other Senate Republicans (and some Democrats) hope to achieve is the complete dismantling of Social Security. They will "save" the system by handing its trust fund over to financial speculators, leaving working-class Americans without guaranteed, secure retirement income.

Social Security privatizers face an uphill battle in trying to destroy the credibility of the most popular government program in U.S. history. They are seeking to:

  • manufacture a scare about the solvency of Social Security;

  • create resentment among blacks, women, the poor and the young that they will not get their fair share out of Social Security;

  • redefine the idea of Social Security as a speculative investment program for our individual savings, instead of what most Americans believe it is – a social insurance program into which everyone pays to provide us income as long as we live.

According to privatizers, there are two big problems facing Social Security: a financial gap and equity gap. Privatizing (or "personalizing") Social Security would solve these problems, say those who hope to dismantle the present system.

The supposed financial problem is based in part on changing demographics. In the 1960s there were six workers supporting every person receiving Social Security benefits; today there are three workers per recipient, and in twenty years or so there will be only two workers per recipient.

Privatizers also point out that the Social Security trust funds will not continue to take in more money than is paid out, as they do now. Sometime around the year 2030 or 2032, the trust funds will run out of reserves, and the Social Security taxes paid in will cover only about 75 percent of benefits. To close the Social Security gap, taxes would have to go up from 12.4 percent to about 18 percent or benefits would have to be reduced. This is according to the Social Security Commission’s most pessimistic scenario.

Hands Off Social Security!

Myth and Reality

The privatizers’ assumptions about financial and equity problems do not tell the entire story about Social Security. The Social Security privatizers conveniently ignore key economic facts.

Social Security may have some manageable financing problems due to population changes. But the scare about lower benefits and new taxes of 18% is based on some biased assumptions:

  • The economy will grow much more slowly in the next century than it grew in this century. Traditional levels of economic growth would increase the Social Security trust funds and remove much of the financial gap. For example, the faster growth of the economy over just the past year added three years to the predicted life of the Social Security trust fund.

  • Furthermore, when privatizers promise that personal accounts will "return" more than Social Security will give us, they are inconsistent. They are comparing a rosy past performance of the stock market with a gloomy prediction for future economic growth. But if the future economy does grow so slowly, then the stock market will also be slow growing. No economist believes that the stock market could do well for long in the future if long-term economic growth is slow.

  • Privatizers also talk as if high returns on the stock market will be about as risk-free as Social Security (although when pushed, they admit, "you take your chances..."). The stock market is not a risk-free investment. For example, take all possible twenty-year periods over the last century of the stock market (1901-1920, 1902-1922, 1903-1923...). For about one-third of this century, stock market returns were negative, after subtracting inflation and stock management fees. If those were your main money-earning years, tough luck. (Most Americans do have just 20 or 25 years of prime earning.)

Hands Off Social Security!

The Fairness Issue

To build support for privatization, Santorum and other opponents of Social Security claim the system is unfair. The so-called equity or fairness problem is based on the following propositions:

  • Because they die earlier than others, black men and poor people get a lower "return" on the money they put into Social Security. If you die before reaching retirement age, your survivors get only $250 in death benefits.

  • Women who miss 15 to 20 years of work to raise children, especially single women, get a lower "return" on "their money."

  • Each new generation gets less "return on their money" than the preceding generation.

  • Compared to privatization, the current Social Security system supports the big gap between the rich and the poor: Social Security taxes keep the poor from saving, while the rich can afford to save after paying Social Security taxes.

  • Privatizing would let blacks, women, and the poor reduce the wealth gap by saving in their own accounts to create wealth. It would also increase everyone’s "return on our money."

Hands Off Social Security!

What Kind of System?

The privatizers’ whole game is to get us to think that the taxes we and our employers pay are "our investment money," on which we should expect a rate of a return. As soon as they succeed at getting us to think about Social Security as if it were an investment, they can get us to think about ourselves as individuals all alone, and forget any social solidarity. Then they can convince us to see risky investments as something we must accept when we think about our retirement income.

Social Security taxes are taxes designed to pay for social insurance — retirement income for those who live long enough to need it, not personal investments. The main question is not whether someone gets more than others before dying (though this can be an issue!) — it is whether people are retiring with enough income. Privatizers want to make the question of enough retirement income a private investment issue, while Social Security makes it a public issue and a right.

Hands Off Social Security!

What About Fairness?

What about fairness for women, blacks and the poor?

Women have been heavily disadvantaged under Social Security, but many of the problems have been corrected. Women do not need personal Social Security savings accounts to fix the remaining problems.

The gap between blacks and others pretty much disappears if you look at all of the Social Security programs – not just retirement but also survivors and disabled programs.

Last, the idea that the gap between the rich and the poor will close significantly if the poor are forced to save 4% of their low incomes is ludicrous. Since the rich would also save an additional 4% on larger income, the gap would widen!

Hands Off Social Security!


Privatizers like Sen. Santorum have adopted as their guiding principles the preservation of benefits to survivors and disabled workers, focusing on the people least well-off, and no new taxes.

Santorum would "save" Social Security by dividing the 12.4 percent Social Security tax Americans and their employers pay, placing 4 percent into personal accounts (like 401[k] accounts) where we would decide what investments to make, and retaining 8.4 percent for a retirement safety net. Upon retirement, personal accounts would buy annuities. Some plans put more, others less, into these personal accounts.

The Santorum crew’s guiding principles have everything to do with their goals of privatizing the system, and little do with saving any semblance of the system initiated under President Franklin Roosevelt’s New Deal. Most Americans have gone beyond thinking of Social Security as a mere safety net to seeing it as a form of social insurance to guarantee basic income for all retirees, survivors and the disabled. This idea deserves to be defended against privatizers.

What about taxes? The rich pay Social Security taxes only on the first $68,000 of their income. Removing this cap to require the rich to pay Social Security taxes on all of their income would close about 67 percent of the predicted Social Security shortfall. Focus on the poor? A hollow claim. If only 8.4%, instead of the 12.4% tax, goes into the new safety net, this will push the net even lower!

Eliminating Social Security ranks high on the corporate agenda. Privatization would open the trust fund to the finance industry, making a handful of speculators wealthy at our expense. Corporations have long desired the wholesale elimination of social protections that support American living standards, in order to lower our wages. If our government retirement plan is eliminated, Social Security will be replaced by widespread individual insecurity.

Don’t let Wall Street skim off your hard-earned Social Security dollars.

(This article is based on a presentation by UE Research Dir. David Alexander to the May 29 meeting of the UE-GE Conference Board.)

UE News/July, 1998

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