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Privatizing Social Security Would Help Only Wall Street
Published on Sunday, December 26, 2004 by the Capital Times / Madison, Wisconsin
Privatizing Social Security Would Help Only Wall Street
by Joel McNally
Social Security is a truly amazing government program that Americans willingly pay into because, as much as we may try to deny it, all of us expect to grow old some day.

We can all go to health clubs and take increasingly exotic drugs to try to prolong that day, but the most we can ever really hope to achieve is to add a few additional years of drawing benefits.

President Bush wants everybody to think the wonders of medical science and the impending retirement of the baby boomers is creating a crisis for Social Security.

No one who actually lives a long and full life considers his or her continued survival to be a national crisis. And it's not.

The good news is your politicians are lying to you again. Social Security is not in crisis. There is absolutely no reason to resort to drastic measures that could bring back the bad, old days of aging Americans dying in abject poverty.

The quickest way to dismiss this phony crisis is to read New York Times columnist Paul Krugman, who also happens to be a Princeton professor of economics and former chief international economist for President Ronald Reagan's Council of Economic Advisers.

That makes Krugman one of the few people working in journalism today who actually knows what he's talking about on economic issues.

Krugman acknowledges that, yes, indeed, if politicians do absolutely nothing, the planned surplus in the Social Security Trust Fund to pay benefits to baby boomers would run out in the year 2052.

That doesn't mean Social Security would be broke. It would still be taking in enough in taxes from working employees to pay 81 percent of the benefits promised to retirees. But a financial shortfall would begin on that fateful day half a century from now.

But if we wanted to extend the surplus in Social Security into the 22nd century, it wouldn't be all that difficult to do. It would require less than a quarter of the annual government revenue lost as a result of the enormous Bush tax cuts that went primarily to the wealthy.

The amount needed would be roughly equivalent to the tax cuts that went to people who make more than $500,000 a year. What the heck, they'd never miss it.

A simple way to get wealthier Americans to pay their fair share of Social Security would be to remove the cap on payroll taxes. Right now, everybody pays Social Security taxes on the first $88,000 of their income.

That means anyone earning less than $88,000 a year pays Social Security taxes on their entire income. But anyone who earns more - even millions more - doesn't pay one more dime into Social Security.

So if there's no crisis in Social Security, why would President Bush want to privatize Social Security by pushing to allow younger workers to invest their own Social Security funds in the stock market?

Those who have watched their own private retirement funds dwindle in the stock market in recent years know there's no sure thing. If people lost their retirement funds, the government would either have to reimburse them for their losses or let them die in the gutter.

Why would any president take such a risk when the current system is working? Follow the money.

The biggest winners in the president's privatization scheme are the financial managers on Wall Street. They are the ones who are going to skim millions of dollars off the top to manage those private investment accounts.

The only other real fans would have to be some cartoon cabal of wealthy, right-wing ideologues meeting in the plush leather backroom of some private club. You know, the gnarled gnomes who have always detested Social Security and that pinko President Franklin Roosevelt who created it.

Some younger workers are being tricked into supporting privatization on the erroneous assumption that if by chance they did happen to earn more in the stock market, they would have more money in their retirement.

They should be excused for making such a foolish assumption. That certainly sounds like what President Bush is promising them.

But if you read carefully between the lines of the president's proposal, that's not the way it works. The whole point of trying to earn higher returns in the stock market is to reduce the Social Security benefits paid out by the government.

That's how the scheme shores up Social Security. As earnings go up, the government pays less.

Oh, yeah. The government also has to borrow trillions of dollars to set up those funds. That's because all the payroll taxes collected from current workers already are being used to pay current retirees.

But don't worry about that. Your grandkids will figure out some way to pay those trillions along with the record $400 billion deficit President Bush already has put on their tiny backs.

Joel McNally of Milwaukee writes a weekly column for The Capital Times. E-mail:

© 2004 Capital Times


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