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The NEW New Republican Scam for Social Security

Robert Freeman

The mocking aphorism about chutzpah has the child who murdered his parents throwing himself on the mercy of the court because he's an orphan. The Republicans may have outdone even that caricature with their new proposal on Social Security. 

"Lock Box Lite" doesn't even pretend to solve any fundamental problems with Social Security. Rather, it takes the existing Social Security surplus and invests it in treasury bonds under the guise of "private accounts." Its main purpose is to give Republicans political cover from the debacle of president Bush's botched Social Security sales job. 

Bush came out of the gates in January intent on spending the "political capital" he claimed to have earned in the 2004 election. Social Security reform would be the centerpiece of his second term domestic agenda. 

But the campaign started blowing gaskets almost before it began. Bush's initial salvo was a domestic version of the technique that had worked so well for him in Iraq: the Big Lie. He claimed over and over again that Social Security was "in crisis," "flat broke," and "bankrupt." 

Fortunately, the data on Social Security are not under national security embargo like, say, records on weapons of mass destruction. They are posted daily on public web sites. The fact is that Social Security has a $1.8 trillion surplus and can pay 100% of scheduled benefits until 2041 or 2051, depending on the projections. If that is "flat broke" or "bankrupt" then Bush is just as surely Eleanor Roosevelt or the Virgin Mary. 

Worse, Bush's plan for "saving" the system would have actually made it worse. His proposed "private accounts" would have taken money out of the Social Security Trust Fund, in effect creating the very crisis he was pretending to solve. And it would have left future retirees worse off than if nothing was done at all. 

To do all of this, Bush wanted to borrow upwards of $5 trillion for "transition costs." This would make up for the current payroll deductions that were going into private accounts and therefore would not be available to pay retirees their promised pensions. Now, the entire U.S. National Debt, run up over 230 years, totals $7 trillion. And Bush wanted to borrow nearly that much to make worse a problem he was pretending to fix and that didn't even exist in the first place. 

Wait, it keeps getting better-or worse, depending on your perspective. Even after all that, retirees would still never have seen any of the money they had put into their private accounts until they had paid back the government the money that it had borrowed to set up the accounts in the first place. And if they didn't earn at least 3% above the rate of inflation for the duration of their participation in the system they would never see a cent. 

I am not making this up. 

Is it any wonder that the more Bush talked about the plan, the more the public rebelled against it? His self immolation on the issue got so bad Karl Rove had to pull him off the case in May lest he drive his poll numbers-and the rest of the Republican party's with him-into single digits. But now comes the sequel. 

House Republicans just proposed a plan to divert the Social Security surplus into private accounts. The plan is for the government to sequester the Trust Fund surplus into Treasury bonds until retirees begin drawing them down in 2017. That way the government won't spend the money intended for retirees. This is where the REAL chutzpah comes in. 

Bush is hands down the all-time world champion spender of Social Security Trust Funds. When he was running for office in 2000, he declared, "We're going to save Social Security by not spending the Trust Fund." Since taking office, however, he has masked the size of his record budget deficits by taking money from-you guessed it-the Social Security Trust Fund. 

Last year the heist amounted to $160 billion. Since he took office, Bush has quietly spent over $640 billion of the Trust Fund's money in this way. 

Even more amazing, one of the variations on Bush's phony "bankruptcy" tune was that the surplus was really only a bunch of I.O.U.s., treasury bonds. "There is no Trust Fund," he claimed. Now, he wants to lock that same non-existent Trust Fund out of his own reach by using the very same bonds he only last month decried as "fictitious." 

At its root, the problem is that Bush is simply spending more money than he brings in--$580 billion more last year. It makes him look like Santa Claus in the short run but in truth it is a theft from future generations who will be stuck paying it back. If the Republicans put the Trust Fund in a "lock box" all that will happen is that the nominal deficit will suddenly become all that much bigger. And it, too, is funded by treasury bonds, by borrowing. 

In other words, as long as the Bush spends more than he brings in, and as long as he borrows to make up the difference, the whole scheme to "lock away" the Trust Fund is a fraud. It amounts to no more than moving bills from one pocket to another and pretending you're richer as a result. All of the bills in both pockets still have to be repaid. And if Bush really wanted to help Social Security, instead of simply pretending like he was, he could balance the budget by raising taxes on his wealthy benefactors or cutting back on his prodigious spending. It worked for Clinton. 

The final indignity of the whole affair is that it was the working and middle class who put up the money in the Social Security Trust Fund that Bush used in 2001 to slip his wealthy benefactors their massive tax cuts. That is the essential scheme by which Bush has transferred ever more of the nation's wealth to those who are already the wealthiest. Over their life, those tax cuts amount to five times what it would cost to fix Social Security forever so that those working people who funded the giveaway don't have to live out their retirement eating cat food. 

But rather than doing the right thing, the honest thing-which is to say actually fix the system by rescinding just a portion of the cuts-Bush and his minions play these kinds of games. Apparently Bush has gotten fat and lazy on the easy lies he peddled in Iraq. But this one is going to be a much harder sale. It gives chutzpah a whole new meaning.


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Robert Freeman

Robert Freeman

Robert Freeman is Founder and Executive Director of The Global Uplift Project which builds small-scale infrastructure projects in the developing world to improve humanity’s capacity for self-development. Robert taught economics and history at Los Altos High School where he also coached the Speech and Debate team, including producing a national champion in 2006. He has traveled extensively in both the developed and developing world. He is the author of "The Best One Hour History" series which includes "World War I" (2013), "The InterWar Years" (2014), "The Vietnam War" (2013), and other titles.

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