Corporatizing Social Security

January 5, 2004
By Patricia Goldsmith

We 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 into poverty.

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.