Corporatizing Social Security
January 5, 2004
By Patricia Goldsmith
are hearing a lot about Social Security these days, mostly in terms
of its soundness as an individual investment program. What we don't
often hear are facts about its usefulness - its indispensability
- as the mainstay of our fraying social safety net.
Consider the fact that two-thirds of all Americans who are retired
or on disability rely on Social Security for fifty or more percent
of their income, according to the Social Security Administration.
One third rely on it for ninety percent of their income after
retirement or should they become unable to work.
Our attention is instead directed to the fact that the Social
Security trust fund, currently running a surplus designed to pay
for baby boomers' retirement, will, by 2050 or thereabouts, be depleted
to the point that it can only pay 80 percent of its benefits. This
potential future shortfall, which Social Security has faced repeatedly
throughout its history, is being called a crisis by Republicans.
In the past, in spite of dire warnings about future insolvency
and the shrinking number of present workers supporting retirees,
Social Security has been "saved" by simple adjustments to the Social
Security payroll tax and to the age at which retirement benefits
may be drawn. By simply raising the cap on the payroll tax so that
workers continue to pay the tax on income over $90,000 a year and
increasing the full-benefits retirement age, perhaps to 67, would
eliminate the problem. But such a sensible solution is not what
Republicans, who have always hated Social Security, are after.
We are told by Republican proponents of "reform" that we have
a great opportunity here. By "privatizing" Social Security, Americans
can own their future. They can invest their own money in the stock
market and reap far greater returns than they would receive with
Social Security as it now stands, they say.
But none of that is true. What they are proposing is, essentially,
an enforced savings account. Workers will be restricted to relatively
low-risk investments - and thus will NOT be making their own decisions
about how to invest their own money. The notion of privatization
is a fiction.
What the Republicans are really offering is the corporatization
of Social Security. You will be offered a choice of a few highly
restricted, relatively low-risk accounts to invest in, for which
you will pay management fees to private corporations, thus losing
the extremely low overhead (a fraction of one percent) associated
with a massive government program like Social Security.
In addition, with the introduction of the profit motive comes the
necessary risk of corruption. Does anyone believe that if Wall Street
gets its hands on trillions of dollars of taxpayer wealth, there
will be the absolutely impeccable administration Social Security
has enjoyed as a government program - over seventy years without
a single waste, fraud, or mismanagement scandal?
In other words, how long will it be before some greedy account
manager is doing the perp walk in an orange jumpsuit? And when they
do, what protection will there be for those who were bilked out
of their retirement income?
Let's remember that the corporations to which the Republicans
wish to give the gift of our future are the same corporations who
are deciding, more and more, that they don't want to honor their
previous commitment to their own retirees with respect to health
care benefits. Do we really want to entrust the corporate world
with more power over our future?
Moreover, there will be no real option for anyone to keep things
just as they are. If adopted, we will all be forced into the new
system, with its new costs and risks - and, as all honest advocates
admit, with reduced benefits across the board.
Social Security is not an investment owned by individuals, much
as we respect such investments in our society. Rather, Social Security
is a government program that represents the covenant between generations,
designed to keep those who are no longer able to work from falling
When looked at in this way, the Republican proposals fails in two
important ways. First, it distorts the public debate by failing
to admit that we even have a responsibility to those who have worked
hard and paid into the system their whole lives and are now ready
to retire. Second, it is fundamentally deceptive in its description
of what is being offered, and risked.
Americans aren't afraid of risk. They believe in capitalism and
the stock market. Those who take risks are entitled to their rewards.
But we aren't being asked to risk merely all that we have - that
would be nothing. We are, in fact, being asked to risk all that
we will ever have.
With such a grave decision ahead of us, let's at least frame the
discussion properly: this is not about privatization and private
ownership of wealth. The proposed changes to Social Security are
about corporatization and giving large corporations power over vast
sums of taxpayer money.