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February 2005, Volume 56, Number 9

February 2005, Volume 56, Number 9
» Notes from the Editors

The battle over the future of Social Security, the site of continual skirmishes since the Reagan era, is now being waged in earnest (for a history of this struggle see The Editors, “Social Security, the Stock Market, and the Elections,” Monthly Review, October 2000; see also, “Social Seceurity: The Phony Crisis” by Jacob Morris). President Bush began his second term by declaring that partial privatization of Social Security through the creation of personal investment accounts was at the top of the domestic agenda of his administration. This would require an estimated $2 trillion in additional borrowing over the next ten years, and even more after that (New York Times, January 3, 2005), to be coupled with drastic cuts in future Social Security benefits. The White House is counting on the Republican majority in both houses of Congress, the backing of Wall Street, and years of unrelenting ideological warfare against Social Security as the bases on which to effect this change.

Yet, there are already signs that a strong opposition to the Bush plan is developing, and that more than two decades of near universal establishment propaganda against Social Security is finally wearing thin. The mainstream media, which previously merely parroted outright falsehoods about Social Security, is beginning to expose the truth (while ignoring its own earlier complicity). Both the Washington Post and the New York Times have recently carried stories pointing to the phony nature of the Social Security crisis and the economic perils of the Bush plan. The January 4, 2005, issue of the New York Times carried a full-page ad by the American Association of Retired Persons (AARP) condemning the personal investment account plan. This counterattack is emerging in spite of the generally weak-kneed response of the Democrats to Social Security privatization, the previous failures of the AARP to rise effectively to Social Security’s defense, and the lackluster response of the business-oriented leadership of most trade unions. One likely explanation for this dramatic turnaround is that a significant part of the ruling class is now worried about the repercussions of the Bush plan on the stability of U.S. capitalism as a whole and is adding its support to the opposition.

The first thing to understand is that the claim that Social Security is in crisis is a scare tactic that misrepresents the financial viability of the system. Beginning in 2018 Social Security is expected to be paying out more in benefits than it is receiving in income. Based on this it is often contended that the system will be virtually “bankrupt” at that point and soon won’t be able to cover its guaranteed benefits. Yet, Social Security will still have trillions of dollars in U.S. Treasury securities. These Treasuries mean that Social Security can continue to cover 100 percent of its guaranteed benefits up to 2042 according to the estimates of the Social Security Administration and up to 2052 according to the forecasts of the Congressional Budget Office. After mid-century it is possible that Social Security would not be able to cover all of its guaranteed benefits simply out of its own funds. But the actual shortfall is expected to be small in relation to Social Security as a whole (not more than 20 percent of total benefits) and minuscule in relation to the size of the U.S. economy. At most, only minor tinkering with the Social Security system or a relatively small injection from the general tax revenue would be necessary to put it on a much more solid basis. The cost of “fixing” Social Security according to the Congressional Budget Office would require a smaller portion of GDP than the United States is currently spending on the war in Iraq and only about a quarter of the government revenue lost each year due to the recent Bush tax cuts, much of which went to the rich (Paul Krugman, “Inventing a Crisis,” New York Times, December 7, 2004).

The real point, however, ought not to be the financial viability of Social Security as a separate government entity supported by a regressive payroll tax, but rather keeping a promise that was made to U.S. workers. Guaranteed retirement benefits should remain guaranteed, whether Social Security remains financially self-supporting (as it is at present) or not. Social Security as originally designed was not meant to be self-financing indefinitely. Its New Deal framers expected that it would require periodic injections from the general tax revenue, although funded primarily through its own regressive payroll tax. In his “Economic Bill of Rights,” presented in his January 11, 1944, state of the union address to Congress, President Roosevelt stated that such a “second bill of rights” included “the right to adequate protection from the economic fears of old age, sickness, accident and unemployment.” A true defense of Social Security would not raise the retirement age or cut benefits-two compromises favored by today’s Democrats-but would treat old age insurance as an economic right and the benefits as guaranteed.

The real threat to Social Security comes not from an internal crisis but from the Bush plan to privatize it by setting up personal investment accounts and drastically cutting benefits for retirees-a plan that would require trillions of dollars in new government borrowing. Apart from the effective demolition of Social Security itself through the diversion of a part of its revenues into private accounts, this would lead to an explosion of the federal deficit, skyrocketing interest rates, and a further destabilizing of the dollar. Recognition of these economic perils seems to be generating a split at the apex of society and a sudden reversal by the media, which is beginning to expose what might be called the “Great Social Security Crisis Hoax.” As the New York Times (January 3, 2005) describes the economic dangers of the Bush plan: “The borrowing that would be needed to establish private accounts could lead to higher interest rates, a weaker dollar and slower economic growth. It is also likely that future tax hikes would be required to cover the interest payments on the additional national debt. The only hands-down winner would be Wall Street, as fees to manage millions of accounts poured in.”

With voices within the establishment now directing sharp criticisms at the Bush program and exposing the myth of Social Security’s impending “exhaustion,” more space is being opened up for workers and those on the left to organize to save it. The role of labor educators is key. The battle for Social Security is an issue of class struggle. Union members should pressure their leadership to join the class struggle to protect what was the crowning achievement of Roosevelt’s New Deal. The main task is to reverse a conservative propaganda campaign that has convinced ordinary working people, particularly the young, that they will be better off without Social Security (and with the substitution of private accounts) than with it (given that it is said to be failing). If the Great Social Security Crisis Hoax is effectively exposed, and the real costs and risks of private accounts are made evident, public support for privatization of Social Security will dry up overnight and the Bush administration will be handed a defeat that could herald its downfall. Let us recall the arrogance of Nixon after his re-election in 1972, and his fate.

MR will continue to follow the Social Security struggle in upcoming issues. Stay tuned for more in the March Notes from the Editors.

Two documentaries of interest to MR readers will be broadcast on public television stations this month. One is “Malcolm X-Make it Plain,” a definitive profile produced for the series, American Experience. The other is “Scandalize My Name” with Ossie Davis, Harry Belafonte, and others who resisted the McCarthyite witch hunt of the 1950s. They are interviewed about the shameful events of that time and their devastating effect on black artists and entertainers. The Malcolm documentary is scheduled for February 21, 9-11:30 p.m. (EST) and “Scandalize My Name” for February 28, 9-10 p.m. (EST), but times may vary so please check local listings.

Joanne Grant, who died on January 9, was an acclaimed author and film maker. Her work included a biography of Ella Baker, the great mentor of SNCC, and Black Protest, the standard text for civil rights courses. Her 1960s civil rights reporting for the National Guardian taught us all how to blend political journalism and radical activism. She was our friend and we at MR will miss her.

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