Citizen's Rent 2005

New Social Security Privatization Proposal Doesn't Solve a Thing

What kind of intellectual vacuum do you need to live in to make this case? Here it is.

1. Social security will go bankrupt when the social security trust fund is depleted.
2. The trust fund is really just a pile of IOUs anyway.
3. To save social security we need to privatize it and let folks invest their social security payments in the stock market.
4. Privatizing social security costs a lot of money.
5. The solution is to fund privatization by using the social security trust fund surplus - the money represented by those IOUs.

Did you follow that? We need reform because the trust fund isn't solvent and it's not real money anyway so let's use the money represented by the  trust fund to pay to privatize social security. And the privatization would end when the surplus ended, providing a very short window for the program (although we all know how much the Republicans like passing laws that expire as a strategy for permanent laws - they just extend the expiration date again and again).

And note, this plan does nothing to address the actual solvency issue - it just redirects the spending of surplus dollars from other programs. The "solution" doesn't solve anything except the impasse over how to fund privatization. Of course, we'd see huge cuts in other programs that are currently funded with the surplus, but hey, who cares? It's not like the money is going towards essential programs like health care for the poor or anything.... except it is.

This proposal has all the hallmarks of a political maneuver designed not to solve any real problems, but to support an ideological position (privatization) and to undermine the opposition (Dems opposed to privacy and Pubs concerned about the deficit).

We'll being hearing grand announcements about the willingness of Pubs to compromise and great condemnations about the Democrats unwillingness to propose solutions. But the bottom line here is that the Pubs aren't compromising - they're still chasing privatization without addressing solvency. And the Dems aren't oppositional simply because they won't propose a program that supports the conservative ideological demand to privatize social security.

If the Republicans are serious in their claims that social security faces insolvency or bankruptcy, that there's a crisis,  they'll propose a solution to that problem instead of ignoring while they chase their ideological dream of privatization.

Bush Trades the Carrot for the Stick

Bush has tried to convince Americans that Social Security is in crisis and that we must act now. He's talked about insolvency, bankruptcy, the fictional trust fund (just a bunch of IOUs back by the full faith and credit of the United States). He's barnstormed the country with scripted town halls, he's given speeches at event after event, he's sent  his ambassadors out to preach the word. He's arm twisted Republicans in Congress, lectured, hectored, and implored. He even interrupted sweep week on the networks to speak directly to the nation.

Until that national broadcast, he hasn't said anything new for months. The mantra has been "we're in crisis, let's privatize!" That privatization doesn't address the alleged fiscal  crisis is occasionally acknowledged. He flirted with and backtracked on the idea of raising the cap on payroll taxes. He floated and recalled the possibility of adding private accounts on top of social security. But by and large he's had a social security stump speech that  he's stuck to.

But at that nationally televised press conference, he suggested that we address the fiscal shortfall with indexed benefits - in other words, that we cut benefits for the wealthy and middle class, while still privatizing. At best, this proposal was met with tepid enthusiasm and the headlines all screamed that he wanted to cut benefits. His effort to actually propose a solution to the future shortfall in funds fell flat.

So he's changed tactics and gone back to what's worked for him in the past: FEAR.

The reason I say do nothing and get a tax hike -- if we don't do anything, it's estimated that younger workers will have to pay an 18-percent property -- payroll tax to make good on the promises. If you don't like 12, try 18. That's a lot. Payroll taxes are some of the highest taxes people pay here in America, and the idea of not having the political will to address Social Security and sticking younger workers with a high payroll tax doesn't make any sense to me. (5/3/05 speech in Mississippi)

It's a new approach to selling privatization, to turning our retirement insurance program into an entitlement program (as happens with his indexed benefits proposal). Scare people. If they won't respond to the carrot - ownership, wealth accretion, control - then get out the stick and threaten a 50% increase in taxes. It doesn't matter that this is a canard, that no-one has suggested that this kind of tax increase is possible let alone probable. It's a good stick so he's hitting us with it.

Bush Embraces Wealth Redistribution

Imagine it's 1995. Imagine Clinton proposing a reform of social security. Imagine he proposes changing the way that benefits are determined so that the wealthiest would experience signfiicant cuts in benefits, the middle class serious cuts, but the lower class wouldn't see a change. Can you hear the Republican howls of rage? The tantrums over this proposed redistribution of wealth?

Fast forward to today. Make it Bush instead of Clinton.Keep the proposal the same. You don't have to use you imagination. This is what Bush proposed last night. Now listen closely. Do you hear the Republican howls of rage?

Me neither.

Citizen's Index: Save the Children

Percentage of Social Security beneficiaries who are retired workers or spouses: 68%

Percentage who are children: 8%

Rank of Social Security in government programs that help children: 1

Age that Pres Bush says will be protected from any proposed changes to Social Security: 55

Age of President George W. Bush: 59

Age of First Lady Laura Bush: 59

Percentage of America's children who live in poverty: 17%

Percentage of people older than 65 who are living in poverty: 10%

Citizen's Index: Taxes

Number of words in the year 2000 IRS tax code: 1,395,028

Times larger than the U.S. Constitution: 319

Number of words in IRS tax regulations: 8,551,444

Times larger than the King James Bible: 11

Number of IRS schedules, forms, and instructions: 649

Percentage of federal taxes owed that are uncollected each year: 15%

Dollars owed that are uncollected each year: $257 billion to $298 billion

Amount it cost the IRS to collect $100 in 2004: 48 cents

Annual budget for IRS: $10 billion

Amount Americans will pay this year to comply with tax code: $194 billion

Chances of being audited: 1 in 200

Number of IRS employees: 104,000

Percentage of phone calls the IRS doesn't answer: 40

Getting Down to Business

It is my fervid hope that the continued dissolution of support on the right for privatization of social security will kill the initiative so that the government can actually address the problems at hand - a projected shortfall decades from now and the more compelling crisis in medicare funding, which we'll face ever so much sooner.

Stupid Is as Stupid Does

So the Treasury Department has launched a web site to promote privatization. Good for them. Everyone knows by now that you have to have an online presence. But who is the Internet mastermind that put this together and failed to take the basic step of registering their URL under all available domains, specifically .org and .com? They took .gov and left the others available for anyone with a few dollars and an interest in toying with them.

It didn't take long for the folks at In This Together to see the opportunity and leap on it. They registered the .com and .org URLs matching the government's .gov URL, offering us their version of Strengthening Social Security. It's spoofs the design and content of the government's site but the content is radically different - they oppose privatization.

It's likely that Treasury's web site is one of the initial productions by the first three hires for their new "war room", established to promote Bush's privatization scheme. If so, it doesn't bode well for them in the future. The missed step - registering alternate domains - is a basic one and the fact that they missed it is informative. Well, it's really just plain stupid. And that's our good fortune.

Mastering the Art of Obfuscating the Truth

In his Washington Post column today, Sebastion Mallaby does a masterful job using the English language to mislead and misinform while coming across as reasonable and well informed. It's an art form, really. It takes skill and practice. If you'd like to try your hand at it, modeling your efforts on Mallaby's column and focusing on social security like he did, just follow these ten easy steps. 

Cry foul that the Dems don't have a social security solvency plan.

Ignore the fact that Bush doesn't have one.

Now, don't highlight the fact but smoothly switch the subject from social security to all "entitlement" programs. Don't mention that this includes more than social security. Let the reader think that social security and entitlement programs are synonymous. No need to point out that you've added Medicare to the mix. Oh, and be sure to use the word "entitlement" since it pushes buttons and makes recipients of funds sound demanding and undeserving.

Generate fear by saying  programs beloved by Democrats won't be funded down the road unless they come up with a plan to reform "entitlement" programs.

NOW offer the Democrat's plan for social security funding shortfalls (the one you reprimanded them for not having), but position it as a plan to address all "entitlement" program shortfalls, including Medicare. And find it wanting since it only addresses social security. Be careful not to mention that privatization doesn't address social security solvency or any other "entitlement" funding issues.

Offer a false choice: be an ostrich or respond to Bush calls for privatization with proposals to reform all "entitlement programs". Don't offer the choice of addressing only social security funding shortfalls. Really don't mention that the Republicans control the agenda and haven't placed reform of any other programs on the table.

Imply that Democrats think nothing should be done to address social security funding shortfalls by reprimanding them for not acknowledging that Republican proposals are better than doing nothing.

It's time to promote privatization, pitching it as a program that benefits the poor (but be careful not to mention the trillions of dollars in transition costs or any other pesky details that undermine this point).

Declare that unified opposition to privatization is a sign of a close-minded party.

Label the Democrats ostriches for not acknowledging the urgency of "entitlement" reform - and be sure not to note that once again you've shifted from talking about social security privatization (which you just pitched) to talking about a number of programs including Medicare. Be sure to avoid acknowledging that Bush & Co aren't addressing any of the other programs.

You're done. You 've written a piece that obfuscates the truth while painting Democrats as the do-nothing, close-minded, short sighted party and the Republicans as the courageous party willing to take on the big problems. Nice job.

Taking Our Money and Then Taxing Us to Repay It

The Republicans keep referring to the Social Security trust fund as a pile of IOUs, a mirage, a fictional source of funds. The trust fund was built up, of course, because in 1983 the system was facing insolvency. Under the advice of Greenspan, Reagan raised payroll taxes to cover the pending insolvency and to build up a surplus to cover the future burden caused by the baby boomers retiring and collecting benefits.

I've been paying those higher taxes most of my working life. Only to find out that it's been a shell game, that in the name of building up resources to cover future deficits in social security funds I've really been giving the government money to spend on a wealth of other things. I want it back. Especially the portion that went to corporate welfare and pork-barrel projects.

I'll tell you something else, too. If the Republicans and any like-minded Democrats really don't think the trust fund is available to pay benefits when needed then no way in hell will I support any reform that provides more money than is needed in that year to pay benefits, I will not support anything that creates a surplus in the trust fund - not unless there's a balanced budget amendment that puts excess social security funds in that infamous lock-box. Burn me once, shame on me. I've been burned by paying taxes to build a surplus that has been raided with no plans to pay it back. Burn me twice, shame on me. I'm not volunteering to build another surplus. No way.

I feel screwed over by manipulative politics. Raise my lifelong payroll taxes to build a surplus to cover a projected need - one I'm willing to pay for - and then use that money for something else with no planning to replace it, then tell me you need to raise my taxes to pay back the money you took that I put in? The only response I have is profane. So I'm done.

Random Thoughts on Social Security

It seems to me that what makes social security the "third rail" of politics isn't any effort to sustain it or address solvency issues, as Reagan did in 1983 by increasing payroll taxes. It only becomes the third rail when you try to mess with the basic structure of the program.

Bush is claiming that private accounts aren't dead on arrival, that he's still in the early stages of the process. But that doesn't seem to match his clear expectation that he'd have legislation this year, this spring even. So it's spin, pure and simple.

If I understand the issue correctly, the driving force behind the social security funding shortfall is the size of the retiring baby boom generation vs the size of the working population that will be providing the funds to pay out social security benefits. If that's the case, isn't this a temporary problem? Has anyone seen any information on population projections that show a balancing out of retirees/workers after the baby boomers have died?

In an online discussion about social security, two representatives of the Heritage Foundation stated that their goals for social security were to make it solvent without increasing taxes and to make it a better investment than it is now. Solvency without tax increases means benefits cuts, either by actual reductions in benefits or by extending the retirement age. Let's not be coy about that. As for making it a better investment, that's not about solvency at all. It's an ideological perspective that views social security as an investment instead of an insurance policy/safety net. In the online discussion, the two Heritage Foundation women state outright that while social security "is seen as insurance program, it is not." It's interesting, however, that they see disability payments made under social security is exempt from this privatization scheme since "disability is an important insurance program that is separate from Social Security." A discussion participant from Vienna, VA responds and sums up quite nicely the argument that this is an insurance program.

"There will never be agreement on how to improve Social Security if the terms cannot be agreed upon. You dismiss calling it an insurance program by saying that there are many people that rely on it for their retirement income, and therefore it is a pension program. But if I die before retirement, I don't expect to get anything, just like I don't expect my car insurance company to owe me anything if I never have an accident. Social Security insures that I will not retire in poverty. If I never retire, then what I pay helps others, and I at least don't have to worry about being destitute if I do live to 100. That is the way it should work, and, wow, it does! There is no need to break it by getting the government in the business of investment brokerage--there are plenty of private companies for that!"

The response? Private accounts are voluntary so you don't have to use them to build up real assets if you don't want to. Think about it-private accounts mean that if you die before you retire, your family still gets that money. Apparently, "this is particularly the case for low-income workers whose families are left with little or nothing after the death of a loved one." Huh? Why is it particularly the case for low-income folks? Do they tend to die at an earlier age? Actually, I'm sure they mean that the ability to leave money to family is more critical for these folks since theoretically they don't have other funds to leave behind. But I'm imagining the case where a poor person on the verge of retirement, facing a requirement to use their private account funds to buy an annuity, offs themself so that the cash goes to their family. Far fetched? Maybe. But I wouldn't be surprised if it happened one or two times. Just a thought.