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The New GOP Plan To Destroy Social Security
It is beyond dispute that Wall Street hijinks were the primary cause of the Bush Recession, the greatest economic downturn since the Great Depression, and that the stock and other financial markets are justly viewed with great suspicion by many Americans.
This explains why the 2005 Bush administration initiative to privatize Social Security through savings accounts controlled by Wall Street died a quick death, and there is no doubt that had it been enacted the consequences would have been devastating for people whose retirement funds were in the hands of stock market manipulators and banksters.
Not content to try to kill Medicare and Medicaid, Republicans are now going where voters warned them not to go: A “voluntary” privatized version of the 2005 program called the Savings Account For Every American Act. (Where do they get these names?)
The legislation, introduced last Friday by Representative Pete Sessions of Texas, the chief Social Security Chicken Little, would allow wage earners to immediately opt out of Social Security in favor of a private “S.A.F.E.” account.
“Our nation’s Social Security Trust Fund is depleting at an alarming rate, and failure to implement immediate reforms endangers the ability of Americans to plan for their retirement with the options and certainty they deserve,” Sessions said of the plan. “To simply maintain the status quo would weaken American competitiveness by adding more unsustainable debt and insolvent entitlements to our economy when we can least afford it.”
The devil, of course, is in the details, in this instance provisions that would divert all wages that would go into Social Security after 15 years and 6.2 percent of wages into S.A.F.E. account as well as eventually let employers send their matching contribution to workers’ Social Security to a “S.A.F.E.” account, as well.
Whether the Social Security Trust Fund is being drawn down at the “alarming rate,” as Sessions puts it, is open to debate.
What isn’t is that the government finds itself in a fix. It needs to repay the money Baby Boomers like myself loaned it so we can cover our own retirements. Trouble is, much of that money was used to cover Bush era tax cuts for the rich while fighting the wrong war in the wrong place at the wrong time and a right war drained of funds, boots and materiel to fight the wrong war.
And Republicans, of course, would rather drink hemlock tea en masse than abolish tax cuts for the rich.
There are two certainties about the new program:
* It eventually will bankrupt Social Security, which of course is the intention.
* Republicans refuse to learn from their mistakes.
14 Responses to “The New GOP Plan To Destroy Social Security”
If republicans try to destroy social security (don’t kid yourself, that is what they want) they will pay a heavy political price – as well they should. I mean really, just how shameless and corrupt can you be before your own base gets a clue? Of course they will never be happy until corporate boardrooms run virtually every aspect of our lives. That is their true religion and they will never stop proselytizing. Much of that proselytizing is paying off though, as democrats are getting on board and the supreme court as well. Welcome to the monkey house.
It seems that both parties insist on losing in 2012…3rd party please.
Be careful here, because the finances of Social Security are more subtle than they first appear. The trouble is the government *can’t* repay Social Security, because the only assets SS is legally allowed to hold are IOUs from Uncle Sam. There are some good reasons for that law, but it means Social Security’s “trust fund” is notational, and the government can’t meaningfully repay it.
Baby Boomers and everyone else can only be repaid individually. If they’re retired, that means sending them a check that’s paid by current taxes on someone else. Or if they’re not retired, that means letting them keep more of their money to begin with–for example, in individual retirement accounts like the GOP is proposing.
Fundamentally Social Security’s problem isn’t fiscal, it’s demographic. If you have a lot of retirees relative to workers, the workers have to devote a larger share of their workday (or equivalently, a larger chunk of their paychecks) to supporting the retirees. And they have to do it at the time; we can’t really grow extra food and let it sit around for 30 years until the current generation retires. Society as a whole can’t “save up” for retirement.
“A “voluntary” privatized version of the 2005 program called the Savings Account For Every American Act. (Where do they get these names?)”
I had to laugh too because by the first sound of it, I had the immediate inclination to say “Sign Me UP!!!”
I just read a book called “Don’t Think of an Elephant” that revealed this kind of framing really well, so these titles are chosen as carefully as somebody convincing us that Wonder Bread is going to have us grow immeasurably fast and strong.
It reminded me of a Matt Tabbi comment on the Bill Maher show while he was covering the 2008 presidential campaigns: “You can run any sh** up the flapole and these reporters will salute it.” Just use the correct words: “freedom, U-S-A!!!, tax-relief, family values, Restoring America” etc etc and you can sell sh** for Shinola.
Dr. J:
Thank you for the clarification. You are correct that demographics are at the root of SS’s problems, although that doesn’t change them.
Liberals will contnue to state Social Security is fine through 2035 or whatever, Conservatives will continue to raise the red flags that it is going broke, politicians will continue to establish deficit reduction committees, boards and groups, politicains will continue to ignore recommendations from said committees, and politicians will continue to chastise those that recommend solutions until the day arrives that the sky does fall. Only then will congress take action.
RP-Here is my thing, watching the debt ceiling debate I ask myself if SS were truly going to go belly up would the GOP be warning us or would they actually let it die(which would actually take the gov out of the equation and they would win)? If I believe they truly desire to “save” the system then why are they trying so hard to shift it to wall street that is unstable and if funds are lost will leave retiree’s with no one to go after?
If it is not going to fail and only needs tweaking wouldnt they scream to high heaven that it needed to be fixed RIGHT NOW prior to us seeing that things actually will be fine with a few tweaks? Of course this would take a GOP that is so blinded by ideology and wall street money that they truly care for nothing else…and oddly this is the GOP we see on many issues currently. Everyone will have their own take on this but that is how I view it, saying the GOP wants to “save” medicare/caid or SS is like saying Dems want to “save” the Defense of Marriage Act or Dont Ask Dont Tell meaning it runs counter to everything they say and do.
MSF, your choice of words implies some things I’m concerned tend to mislead people about the nature of SS. Unlike a private company that must either pay its bills or close its doors, SS doesn’t face the binary outcomes of either being “saved” or “going belly-up”.
SS is better thought of as a promise that the government will send checks to retirees. The problem it faces is it’s promising to pay future retirees a fair bit more than it’s planning to exact from workers in taxes, so there will be a growing federal budget gap.
As the gap grows over the next decades, SS doesn’t face a collapse, but the government faces a trade-off. It will need to do some combination of raising taxes and backing off its promises to retirees, both of which are politically poisonous. It certainly won’t renounce its promises to retirees completely, as seniors would quite understandably roast Congress alive. And younger (often poorer) taxpayers are unlikely to stand for an all-tax-increases solution. So the result will inevitably be a compromise that neither side likes.
The argument to “save” Social Security is to do what we can today to defuse this inter-generational showdown.
The reason privatization of Social Security went nowhere in 2005 went nowhere was because no one could figure out how to pay for it, not that there was any great fear of Wall Street, although, after the Great Recession we know there should have been.
As we are being reminded every time this comes up, Social Security is a hand to mouth operation. Every dollar that would go into a private account instead of into Social Security accounts is a dollar more the government has to borrow to pay for outstanding Social Security benefits during the transition. In 2005 it was an additional 2 to 14 trillion dollars of debt, depending on how many people started such accounts. It would be more now.
In 2005 the Republicans couldn’t say how they would pay this money back. This was one of the details they decided to leave to the Democrats in Congress, the minority party at the time. The only way to do it would be to tax the money money in the private accounts. But this would be a tax on wealth, something the United States has never done.
This new proposal to privatize Social Security follows in the generational stupidity surrounding this issue and this solution for it. They say that Social Security is going bankrupt the country and we need to do something about it. And what we need to do is privatize Social Security, borrow even more money than we would have to if we left it alone and bankrupt the country even faster. It makes no sense.
So, once again, the money question. If we can’t pay for Social Security as it is currently structured, how can we pay off those costs plus the additional costs of the transition period to a privatized one?
I agree with the sentiment. With the parties we have, SS and Medicare will be allowed to run into the ground, right about the time I retire, in order to keep short term votes.
However, I think to really fix the partisan problem we need structural change. The current system just supports the two party system too much. I would, however, be interested in supporting a third party as a shorter term solution. Especially if that party committed itself toward enacting structural change.
While we are at it. One structural change I like is instant-runoff voting…
http://en.wikipedia.org/wiki/Instant-runoff_voting
Here we go, again — Shaun unwittingly invites us to revisit the worst behavior by Democrats about entitlements since now. It once more exposes the deranged behavior of the Democrats then and how it’s so similar already to how the Dems are now. The only seriously bad issue here was with the Democrats, and it has the extra property that the Dems have done it again recently!
The main issue here is the bad behavior of the Dems then and now. (and the remarkable similarity — congrats again, Shaun).
[sigh]
Here we go, again (literally, the, and now with Dem lowliness):
Perhaps the first common point must be repeated (and even then, some with closed eyes and minds will never grasp or worse, grasp but never accept it):
Social Security is unsustainable. SOMETHING has to be done to save it, likely changing it. (The two big and obvious measures to take with both Social Security and Medicare are raising the retirement age and imposing means testing of one or more kinds). The sooner this is done, the better for the programs’ future. (Next is something apparently few have an IQ high enough to grasp — and others, strangely, won’t admit it.) The problems will begin when these programs run deficits, as has been said time after time: to pay benefits in full, money will have to be found elsewhere in the federal budget, or new taxes or borrowing undertaken. The sooner these programs are fixed, the easier (and less painful), and obviously better.
In 2005, the Bush people tried to change Social Security with the option of “private” accounts and investments.
This was the source of controversy, and most were opposed to it. It wasn’t just for putting FICA entitlement contributions into what are riskier things than the equivalent of Treasury securities with federal government security. (Of course, the programs are doomed to have to change for the worst; it’s the changed programs that later would be backed up by Uncle Sam.)
Many (lib and con alike) were opposed to it because it involved the private sector. Libs opposed that on principle; they want as much public as they can secure with their efforts. Cons also often were opposed to it — because it was risky. There would be no guarantee that the funds were at a good value when it was time to retire. Libs mainly also opposed it because it would be a huge opportunity to thrive and perhaps to swindle for Wall Street firms. (They were also opposed because it introduced the nature of individual accounts rather than making all collective beneficiaries.)
This was the most wonderful opportunity for the Democrats ever, were they and their liberal associates of any respectable moral and practical level. They OWN these programs (SS and Medicare), and could easily have taken the initiative and revised the programs to save them on the Dems’ own terms (beginning with them remaining fully public, which everyone would have expected, as they would for many Republicans as well). They could have won the admiration of even conservative critics had they done this. Everyone knows change is required, and the sooner it is, or was in this case, taken, the less the change and the better it would have been. The sooner the programs are fixed, the better! (for later states of the programs, to better prevent hardship for beneficiaries, later, for everything)
But what did the Democrats do? (This is the real issue here, even if Shaun didn’t know it when he introduced this subject again!)
The Democrats were mindlessly, deranged-ly obstructive, often truly mindlessly so even in their words (“Social Security will be more valuable later if it’s left alone now” — Hinchey, D-NY). They flatly denied there were problems, that Social Security was fine and ought not be changed, and would be solvent until 2040 (Pelosi’s lie, played on C-SPAN). Everyone knows that the programs will become insolvent, and that they are unsustainable. Everyone with a sufficient IQ also knows. The Democrats denied there was anything wrong with Social Security, and importantly, they opposed any change or any reform at all! They were mindlessly obstructionist (and stupidly obstinate) and shamefully irresponsible. Stupid, too, as then they had the chance to do things on their terms mainly or only, and they threw it away.
At this time, the Democrats showed themselves to be truly idiotic as well as irresponsible. This was a disgrace as well as a loss.
One of their arguments to avoid Social Security reform, that Shaun also ironically permits people to review once more, is that “Medicare is in worse shape; we should fix Medicare first.”
Now we should consider the current situation, not with Medicare and Ryan’s controversial proposal, but instead, the real issue that Shaun unwittingly raised. Entitlement reform is needed more now than it was before. Obama earlier alarmed people with an original desire to increase spending and to have permanent deficits (and debt accumulation). He later changed to having no current budget plan at all. Meanwhile, fiscal and policy reforms are needed, and a bi-partisan commission to study this (to provide political cover for Obama at the time) did so, and presented tame, likely insufficient, but starting-point recommendations.
What did the Democrats do?
Nanci Pelosi said that they, including a start at entitlement reform, were “unacceptable.”
Obama said he would not raise the retirement age or reduce Social Security payouts to people (meaning no means testing, as well as benefit structural reforms).
Harry Reid said that Social Security is fine, that it doesn’t contribute at all to the deficit, and that we should wait thirty years before thinking about touching it.
This is the real issue, the real point being made, that Shaun has unwittingly introduced by posting his article:
The lesson of 2005 was the Democrats’ mindless opposition to reform, and their deliberately irresponsible refusal to change Social Security in any way, approach entitlement reform in any way, and deny there was anything wrong (dishonestly at times). There was lying about it (as I heard from Pelosi on C-SPAN once).
“Social Security will be more valuable later if we leave it alone” was something that a Democrat (Hinchey, D-NY) actually said!
The lesson this past two years, only being exposed again with Ryan’s controversial Medicare proposal, is that the Democrats deny there are problems with Social Security, and that they are mindlessly opposed to reform, irresponsibly refusing to change Social Security in any way, and are the same about Medicare. Pelosi said general, not just entitlement, reforms were “unacceptable”; Obama refused to raise the retirement age or reduce any payout to beneficiaries; Reid said Social Security was sound, that it contributes nothing to the deficit, and that we should leave it alone, not touch it for thirty years. (The rest of the recommendations of the deficit commission were ignored.)
And ironically, one thing they had said about the Medicare whose reform also they have always opposed, is that we should have begun to fix Medicare first in 2005. Ryan makes us remember!
Congratulations, Shaun. You invited all readers to remember how incredibly stupid and disgusting the Dems and their opposition to entitlement reform, and denial of any problems now or later, were, at a perfect opportunity for reform then. It also makes readers note that it’s remarkably similar to the mindless opposition to entitlement reform and denial of problems with them that we’re seeing with the Democrats again, currently!
Shaun unwittingly invites us to recall the mindless anti-reform behavior of the Dems at that opportune time, and how they’re doing the same thing now, at another opportune time.
Those who need to understand more should continue to the footnotes — Extra for Experts. Introduced in 2005 was the threat then and now that liberals don’t want to admit (because they don’t understand it, don’t object to it, or want it but don’t want most people to learn and rightly fear and loathe it).
Extra for experts (apparently, too few!):
The big reason for non-liberals to object to the Bush plan other than favoritism or cronyism concerns is obviously that it would remain a federal program and could make the federal government, even more than state governments, the most big, influential institutional investor conceivable. It’s the biggest, most threatening kind of political “shareholder activism” threat.
That is sufficient, but for those who need to think more, first, before understanding(! — the rest already have thought of thi)s — just consider if the Dems were in power later, and there would be stress placed then on business in which the feds were large shareholders — there would be disgusting to frightening federal requests or demands for “social responsbility” nonsense, or worse, demands for actions or decisions made solely for (liberal) political reasons.
And (for those who need some thinking assistance one last time), of course this would vault from ordinary goings-on the desire by lefties for even more left-fascist measures, namely federal corporate charters, and later, installation of federal officials directly in the personnel of businesses, as additional directors or as managers. (We saw an ugly hint at that with ObamaCo at GM.)
Dunces will not understand, but — it’s not limited to tax revenues from FICA for Social Security. The rest of FICA, general revenues (everyone does know that parts of Medicare, for example, are paid for 75% out of general revenues, 25% out of the bogus “premiums” that beneficiaries pay, don’t they?), all could be invested (with political motives ready to be exercised at any time) in private equities and debt. (I’ve pointed out numerous times that everyone looks at equity securities — stocks — but nobody but a tiny few of us promptly also looks at debt securities — bonds — as well, along with things we’d never expect anyone in government or future beneficiaries to put their money in, too, such as call or put options, futures, or derivative instruments.)
Of course, it is conceivable that Dem (and some GOP) politicians might indeed put tax money into riskier instruments, such as if the Dems were predictably taking part of the accumulated tax funds for “investment” and using it for ongoing regular expenses, or to raise them.(! — but predictable, as they’ve done already) The riskier stuff would be to cover shortages they already had created, or because they were greedy and wanted as much growth for the funds as possible, so they could take and divert the most.
R.P. The denial and doing-nothing will continue. That’s basic for Dems, and GOP politicians will be looking toward their re-election.
The unpleasant will be avoided until it no longer can be avoided, and then most of the politicians at the time, as it’s no longer fun in Washington, will retire, en masse I have anticipated.
It really was a shame that the Dems could have changed Social Security attempted reform by the Bush plan in 2005 to a still-public but financially repaired Social Security in 2005, with thoughts and actions about general retirement reform as well; they could have continued with Medicare reform, which would have made possible future extension of it to everyone else a much more respectable concept in 2009-2010, rather than a nonsensical extreme position not serious for negotiations.
Instead, we see no reform, and the Dems continue to deny problems or any need for reform, and want to avoid any reform.
They still have the upper hand over the GOP (just trying to revive Bush 2005, and what about updating the Bush Commission’s earlier “saving Social Security” report, even?); the Dems OWN the entitlement programs (indeed, the concept)!
And still they resist reform! (and they get help from a few GOP members before elections)
They’re in it to keep their own positions safe or make them better, ironically the same kind of morally-compromised self-serving, exploitive behavior suspected of Wall Street had the Bush 2005 plan gone through.
Shaun, about the GOP Social Security plan now — it’s just a kind of repetition Bush 2005 and should simply go nowhere. No big deal.
There is no equivalent of the report of Bush’s Commission to Save Social Security this time, either, to refer to to justify what they do.
You have to go back then to find the concepts and phrases that the GOP might use now.
Note that it introduces more ironic similarity — that commission was half-Dem, half-GOP, just like the deficit reform commission.
http://abcnews.go.com/Politics/story?id=121706&page=1
Detail for anyone who cares of the individual-account idea.
http://zfacts.com/metaPage/lib/Cogan+Mitchell.pdf
The lesson, Shaun, about the current GOP Medicare and Social Security plans isn’t GOP design to end these programs, but the lack of proposals by the Democrats, who instead deny there are problems and actually oppose reform measures, even whey they have control.