100 Hours: Social Security

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As part of Nancy Pelosi's legislative agenda for the 110th Congress, her "100 hours" program, she has committed to opposing any attempts to privatize social security.

To understand why this is an issue, we need to look at what has come before. president Bush has been beating the conservative drum citing false claims of impending doom vis-à-vis the social security program. His typically republican solution: take it private.

The dream of privatizing Social Security is a dream for the wealthy for two reasons: First, they fear an eventual needs assessment that may prevent them from collecting their own contributions; and, second, they want to see the funds that go into the Social Security trust fund go into the stock market instead.

On its face, the idea of not being able to collect your contributions because you're too wealthy sound disturbing. After all, it was your money. However, only wage earners contribute to social security. That's an important thing to keep in mind. Generally speaking, people do not become wealthy by working for someone else. The people fronting the argument of losing their contributions are simply pandering to the working class dream (work hard, save money, retire wealthy). It is the same sort of reasoning that gets people worked up about the estate tax. The vast majority of people subject to the estate tax at the time of their death will have been born rich in the first place. But, people want to believe they can achieve wealth and don't want it taken away.

As for Social Security going into the market, well, who wouldn't want that? If you've already got money in the market, the extra liquidity will no doubt drive up prices and make your existing investments worth that much more. But, what if the money in your social security account is your only savings; would you put it in the stock market or something less volatile? This is another example of the rich trying to use the poor to get richer. The stock market is a hard place to make money if you don't know what you're doing. If you take it on faith that the market will always grow, you could safely invest in a fund that indexes the market, but there have been times in the past (1900-1940, 1960-1980, 2000-?) where the market grew very slowly or retreated. It is said that a good investor can make money in any type of market, but people investing their social security money are going to be far more likely to pick some stocks/funds and stick with them.

The biggest crime in all of this is the manufactured nature of the social security crisis. Consider these points:

  • According to the numbers used by everyone, including the President's Commission, Social Security can pay all promised benefits for the next 38 years without any changes at all. The nonpartisan Congressional Budget Office (CBO) just upped that estimate to 48 years.
  • By either measure, the 'long-term problem' faced by Social Security over the whole next 75 years is actually less than it faced in each of the decades of the 1950s, 60s, 70s, and 80s.
  • By either measure, Social Security is more financially sound than it has been throughout most of its 69-year history.
  • The projected shortfall for the whole 75-year period is about 0.7 percent of GDP (according to Trustees' numbers which the President's Commission is using) or 0.4 percent of GDP (according to the CBO). This is about one-third to one-fifth of the cost to the Treasury of the 2001 and 2003 tax cuts, if made permanent."

The Democrats are right to stand up to president Bush on this issue. Privatization is just an attempt by cynical conservatives to cash in on the savings of working Americans.


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Read More About:   Bush Administration | Law | Politics | United States