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Why Do Deficit Hawks Hate Social Security?
Last week, Social Security advocates learned something they had long suspected. Arguments for cutting Social Security aren’t really about economics or the deficit. They’re all about waging war on social services.
In short, some very prominent policymakers are out to dismantle Social Security on ideological grounds. The most recent example of this view comes from Alan Simpson, a former Republican Senator from Wyoming who now serves as co-Chair of President Barack Obama’s Federal Debt Commission. Earlier this summer, Simpson was caught on video spreading absurd lies about Social Security, but his latest outburst explains why he’s been so willing to distort the facts. Simpson simply hates Social Security.
As Joshua Holland highlights for AlterNet, Simpson fired off a nasty email to Ashley Carson, who advocates for elderly women, in which he referred to the most successful social program in U.S. history as “a milk cow with 310 million tits.”
Social Security is doing just fine
But Simpson has a lot of power on the Debt Commission, which is expected to recommend that Congress reduce the deficit by cutting social programs in a report this year. But as Holland notes, Social Security isn’t in trouble:
Social Security is in fine shape. It’s got a surplus that will run out in 2037, but even if nothing were to change by then, it could still continue to pay out 75 percent of scheduled benefits seventy-five years from now, long after the surplus disappears, and those benefits would still be higher than what retirees receive today.
What’s more, as William Greider notes for The Nation, Social Security has never added one cent to the federal budget deficit. According to the law that created the program, Social Security never can. Targeting Social Security in order to fix the deficit is like invading Iraq to fight Al-Qaeda. The issues are not related.
Raising the retirement age robs workers
The Debt Commission is likely to recommend raising the retirement age—the age at which Social Security benefits begin to be paid out. But as Martha C. White notes for The Washington Independent, it’s a “solution” that simply robs low-income workers of their tax money. Everybody pay Social Security taxes when they work, and when they retire, they receive federal support. If you don’t live long enough to actually retire, you don’t get any benefit from Social Security.
“The hardship of raising the retirement age falls disproportionately on low-income workers who work in physically demanding professions, jobs they may not be able to continue through their seventh decade. … Moreover, though the average lifespan has increased since Social Security’s creation, those extra years aren’t enjoyed equally by all Americans. Overall, Americans are living about 7 years longer. But the poorest 20 percent of Americans are living just two years longer.”
Raising the retirement age, in other words, disproportionately hurts the poor—the very people Social Security is supposed to help most.
Subprime scandal 2.0
So who would pick up the slack if Social Security were to be cut? The same crooked Wall Street scoundrels who brought us the financial crisis. If the government cuts back on retirement benefits, the financial establishment can step in and manage a bigger piece of the retirement pie. The more we learn about the financial mess, the less we should want to see our retirement money controlled by bigwig financiers. Truthout carries a blockbuster new investigative report by ProPublica’s Jake Bernstein and Jesse Eisinger that reveals a new, multi-billion-dollar subprime scam engineered by the financial elite.
We’ve known about Wall Street’s subprime shenanigans for some time, but the report reveals that banks were essentially selling their own products to themselves in order to create the illusion that people really wanted lousy mortgages. It’s called “self-dealing,” and it’s supposed to be illegal.
Subprime Disaster, meet Mortgage Nightmare
Here’s how the scam worked: Wall Street crammed thousands of mortgages into securities, then sliced and diced those securities into new products called CDOs. Those CDOs, in turn, were divided into different “buckets” and sold to investors. The riskiest buckets paid out the most money to investors, but were the most likely to take losses if the underlying mortgages ever went bad. As the housing bubble grew more and more out-of-control, investors became wary of these risky buckets, and stopped buying them.
Wall Street banks were still making a killing from the packaging and sale of everything else, though, so they devised a plan to get rid of some risky bits: they’d buy them up themselves, without telling anybody. A bank would create a CDO called, say, Mortgage Nightmare CDO. Then it would create a separate CDO, called, say, Subprime Disaster CDO. Subprime Disaster would buy up a risky bucket from Mortgage Nightmare, creating the illusion to the market that banks were still able to sell off risky mortgage assets without any trouble, even though the bank was basically just selling garbage to itself.
That illusion propped up the prices of these risky assets and created more revenue for the tricky bankers who sold them, and plump, short-term profits for the banks. It also strongly encouraged other bankers to issue lousy mortgages to the public, since those loans could be packaged into lousy CDOs and score short-term profits for Wall Street’s schemers.
Ultimately, this scheming resulted in a multi-billion-dollar disaster for Wall Street, which taxpayers ended up footing the bill for. Anybody want to see that happen with Social Security?
Social programs did not cause the deficit
As Seth Freed Wessler notes for ColorLines, deficit hawks’ emphasis on social programs is at odds with the factors that actually created the deficit. The Bush tax cuts, the wars in Iraq and Afghanistan and the bank bailouts are the big-ticket items when it comes to government revenues and expenses. Yet deficit hawks in Congress have been refusing to extend paltry unemployment benefits or food stamps to the people hit hardest by the recession. And pretty soon they’re going to go after Social Security too.
In reality, the deficit is only a problem if investors are afraid that the government will default on its debt. Markets measure this worry with interest rates—high rates mean investors are worried, low rates mean they are not. Right now, interest rates on government bonds are at their lowest in decades. With the recession dragging on and the recovery weakening, now would be a great time for the government to spend more money to create jobs and help those knocked out of work.
Instead, the policy debate features cranky old men whining about 310-million-titted cows.
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15 Comments so far
Show Allweird disconnect beween the header and the column. nowhere is the answer provided to the rhetorical question posed.
there are two reasons that elites hate social security. the first is obvious: it deprives one of the most powerful private sector enterprises of significant play money.
but the second is probably more accurate and more sinister for the rest of us: they hate it because it works. and anything social that the government does successfully directly undercuts the mythology of the private sector that dominates neoliberalism. it is, in other words, daily evidence of one of the biggest political lies ever perpetrated in this country--that the private sector knows best at all times.
in the end, these jokers don't have to abolish it to win. in fact, if they do so, it might be counterproductive. they merely have to do with social security like they have done with every other social program: gut it so it becomes ineffective and is able to used as evidence of incompetent government management. reduce payments, increase age, until the whole program becomes a joke and nobody really wants it anymore. then they strike.
Great comments, drone. But please learn to use the "Shift" key!
Good post! You hit the nail on the head and unscrewed the machine. A few more hammers and a few more screwdrivers, and we might be able to make something work ....
drone, you got it. I would add one more variation on the reasons. They hate Social Security because it distributes some wealth in a downward direction toward people who have worked all their lives and who face abject poverty upon retirement without Social Security. It returns some of the social wealth to those who created it. It is the "deficit" hawk's dearest project to distribute all wealth upwards, to take more for themselves, by any and all means necessary. And they have many long standing dreams and devious plans to do so.
Joe
Actually, they LOVE Social Security - it's ripe for the picking...
The Greybeards on the so-called Deficit Commission ought to be cashiered and the whole effort ended by reducing the primary budget item making deficits bigger and bigger--The Imperial Budget that includes the Pentagon and the whole of the National Security State that offers no security whatsoever.
Furthermore, every letter to the editor page throughout the land ought to scream the truth that Social Security does NOT contribute to the deficit--lack of revenues and gross overspending on wars and other Imperial projects are what contribute most and are what must be cut. IMO, this is the only way the People can defeat Obama's plan to destroy Social Security.
I highly recommend clicking on the Greider link and forwarding it far and wide.
The plutocrats of the world have decided they don't like the social safety net in the US or the greater social support network in much of the the European Union. So take note of the Shock Doctrine as Naomi Kein warns us, they plan to use the crisis they created to undo the gains of labor and the middle class and pitch us into a two tiered society with themselves on top.
Looking for reason here is a waste of time. This is purely about power. They don't care if the elderly die or people work in sweatshops. We keep debating policy and they keep pursuing their agenda. Only organized resistance is of use in this class war.
artemix, you sure got it right.
" Looking for reason here is a waste of time.This is purely about power. They don't care if the elderly die or people work in sweatshops. We keep bebating policy and they keep pursuing their agenda. Only organized resistance is of use in this class war"
Remember---I will not forget I will not be silent
I will fight back
Oh, there's a reason to this--bottom-line profits. If the fatcats can manage to cripple, and then kill, Social Security and Medicare, corporate bottom lines automatically go up, because, first, they wouldn't be paying the employer's share, and that's a 7.5% profit on every dollar paid in wages, without having to have made one single penny's worth of investment in productivity tools and equipment.
Then, when ordinary people realize they won't have anything for their retirement, they'll be forced to put their money into Wall Street and the markets, which has the net effect of increasing the capitalization of those corporations, giving them even more money to use to increase their political power.
Neat, huh?
The connection between Social Security and the deficit is the account is only on paper. The government has spent the money, surplus and all. They don't want to reduce the deficit and pay out to the investors (retired tas payers) at the same time. Not enough money left for the MIC!
In the absence of a structured GHG reduction program, or even Cap and Trade, the best thing we can all do is vote Republican this fall. The resulting triangulation between Obama, Republicans and conservative Democrats will complete the destruction of the American working and investor middle class. Let them take Social Security, too. It won't take much longer for the multinational companies and Wall Street to go belly up.
The resulting 3 and 4 dirt poor generations living together in row houses, elderly in almshouses, and barefoot penniless children walking to school to attend classes of 40 or more students, no insurance, little medicine or dental, little meat, few restaurants, few cars or appliances... Its a good scenario for the environment.
The reactionary forces in the world have been trying to roll back the Left ever since the 1930's. They really picked up steam since the late 1970's, and they think this is the endgame that takes them back to the 1920's, or even the 1890's. Most of the current arguments against Social Security have been floated since the beginning. The difference now is that since 1992, they've captured the Democrats as well as the Republicans, and what's left is just charade for the masses.
This will take major upheaval to correct. The problem in 2008 was the "upheaval" was actually still partly stage managed to facilitate all the bailouts. In the 1930's, they really lost control ...
For years the Congress passed an annual Cost-of-Living increase to Social Security payments to account for inflation. This year it did not happen. The result is that Social Security payments already are not keeping up with inflation.
Meanwhile, the pundits tell us that despite all the borrowing and deficits, inflation is negligible---all but non-existent. Bull pucky! I've been tracking the cost of low-end fast-food items (up about 30 percent and more in the past two years) as well as the cost of food staples for those of marginal income on Social Security (such as pasta, canned beans, dried beans, peas, lentils, etc., eggs, bread, public transit, etc. (up about 30 to 50 percent in the past two years, depending on the item, while beef is WAY up).
People on Social Security are NOW seeing their standard of living going down, down, down. It is death by a thousand cuts while the government pretends inflation is virtually non-existent. Meanwhile, government winter heating subsidies are being cut way back, and local government services like road maintenance are being severely strained by lack of revenues due to high unemployment and foreclosures and falling housing prices (resulting in loss of property tax revenue while county sheriffs are overwhelmed by the paperwork resulting from the auctions on foreclosed properties).
As for the inestimable former Senator Alan Simpson, "awe shucks, I was just having a little fun. After all, everybody knows I'm just a downhome regular guy who speaks his mind."
Or what's left of it...
Also, unless he is including all girls 15 and under, he is grossly over-estimating the number of tits in America (his language, not mine).
-30-
"Also, unless he is including all girls 15 and under, he is grossly over-estimating the number of tits in America (his language, not mine)."
A CD article about a week ago pointed to young girls entering puberty way earlier these days, so maybe the number of tits is actually on the increase.
Ahem, anyway, that article also mentioned the physiological and psychological health issues likely to come from this early puberty - makes the need for better and more applicable medical aid, and social services, all the more pressing.
Sorry, I didn't realize "Greatest Generation" meant retirement will be The Greatest for our Generation, but not yours.
How silly of me.
It's our money - and since the cookie jar is empty, they want to steal it. It isn't a 'social program' when the people who benefit from it are the only people paying into it. (And I'll bet a lot of the filthy-rich had relatives who collected huge amounts of social security in the early days.) And yes, while the individual rich person may not benefit much from it - certainly none of my friends and/or family (except me, the crip) - some have relatives who DO depend on social security.
Those of us who paid in the max every year are the most PO'd about this bullcrap from both branches of the American Fascist Party (Simpson is among the charter members - like Ford, Lindburgh, Bush, Hitler, etc). Stealing our Social Security benefits will be just cause for self-defense - and I hope if it is tried that there will indeed be 'blood in the streets' - that of both blue and red politicians. If you could hang a man for stealing a horse, you should be able to hang them for stealing your pension - especially if you've already paid for it. (And don't give me bull about it being paid by the next generation, either.) Starving anyone - especially someone who paid into their retirement fund - is murder.