Nothing Learned from the Depression

Wall Street and Conservatives Will Destroy Social Security to Benefit Themselves

For the first time ever, Social Security is under serious attack. Americans' confidence in the system is at an all-time low and conservatives have smartly capitalized on that insecurity to push for dramatic changes in the system. Conservatives are rushing to save Social Security, but what most Americans have not realized is that their plans to reform Social Security will lead to its demise.

What is so strange is that ten years ago, it was social programs that didn't work that were under attack. It was a Charles A. Murray '65 strain of conservatism that argued for cuts, not because the expense was too great, but because the rewards were non-existent. We dismantled welfare (2.8 percent of the federal budget) not because it was too expensive, but because it didn't work. But the '90s have brought in a new and perhaps more pernicious strain of conservatism to bear: an entrepreneurial conservatism of efficiency and market values now threatens even America's successful social programs.

In 1994, nine percent of young Americans felt that Social Security would have enough money to pay them expected benefits. Americans are more likely to believe in UFOs than Social Security's solvency, but their concern far exceeds that reality of the problem. Since the mid '80s, the debate over Social Security has been dominated by crisis-mongerers who have sought political gain or higher rating points in the rhetoric of crisis. In the midst of a debate where everyone is talking about a crisis, it is no wonder that Americans have come to believe in one too.

Social Security, however, is not in crisis. In fact, Social Security has never added a penny to the federal deficit. Over the past 62 years, its payroll taxes have brought in more than they have paid out. It is Social Security's surplus that finances part of the national debt. Over the next 75, however, the program is out of balance, and this is the grain of truth behind the crisis rhetoric. The program faces an actuarial imbalance of 2.17 percent. That means that over the next 75 years, Social Security will be expected to pay out 2.17 percent more than it has. This does not a crisis make. Slight cuts in benefits, a slight tax increase (2.17 percent at most), or some combination of the two will keep the program out of financial trouble.

But if you watch television, you have probably been spooked out of your mind. In a story on Social Security, an ABC correspondent claimed that White House figures show that net tax rates for future generations will climb to more than 70 percent of income, unless something changes. Whatever they were talking about has nothing to do with Social Security (the maximum tax rate for Social Security over the next 75 years is the current 12.4 percent plus the 2.17 percent which is 14.5 percent). On CNN's Talk Back Live, a guest stated that to get Social Security to 2029, all you need to do is tax every family in America $42,857. This is what Americans have come to believe, but it is simply not true.

Conservatives (both Democrats and Republicans) have a lot to gain from spooking you. Conservatives know full well that the only way to roll back Social Security is to undermine its public confidence. The Murray argument will not work with Social Security because the program works (in the last 40 years, the elderly poverty rate has plummeted by two-thirds). Those who are out to get Social Security are not arguing that the program doesn't work (as they did in the welfare debate); they are scaring you into believing that Social Security is unsustainable.

Crisis-mongering has always been a strategy of conservatives. They realized long ago that the perception of crisis could permit the politicians to make it look like they're doing something for the beneficiary population when they're doing something to it. This, admits Reagan's OMB director, was the conservative strategy as far back as 1981.

So who are the ghosts and goblins in this Halloween conspiracy to scare Americans out of Social Security? These days, it is a familiar coalition: Wall Street greed plus conservative ideology.

Reinventing government was once a way to streamline costs, but now conservatives have used the push for sound finance to mask their ideology. Latent behind the rhetoric of efficiency and opportunity that makes up the case for privatization lies an ideology of rugged individualism that is encapsulated by the free market. Social Security is a highly redistributive program that, in old age, seeks to ensure a minimum level of subsistence for all Americans. Privatization may be the solution for garbage collection and management of the Congressional beauty parlor, but it will ruin Social Security precisely because social security is one of those things that the market can not provide.

Conservatives are pushing privatization because it will free Americans of their obligations to each other, and give them the opportunity to earn more. After 60 years it may come as no surprise that the lesson that we learned in the depression has been lost. Of course some Americans will be better off with private pensions replacing Social Security. Those who can afford to put their retirement savings in riskier investments will earn higher rates of returns. Plus, those people will be freed of the burden of helping out other Americans. But as some earn more, we will surely see elderly poverty rates soar. Not everyone has the means or the know-how to make the market work for them.

Enter Wall Street which has much to gain if Americans are scared into privatizing Social Security. Even partial privatization could put in excess of $150 billion into the hands of Wall Street fund managers. Management fees on $150 billion is not small change. Small wonder that Wall Street is behind a significant portion of the millions of dollars that have already been spent to push privatization.

What is so troubling about the Social Security debate is that calls for pragmatism have papered over a number of purely political questions. The rich discursive history of American politics that centered on partisanship has degenerated into bipartisan commissions seeking to find practical solutions that will insulate their colleagues from political fallout. Instead of talking about what we should be providing, or how we should be redistributing wealth, or what our obligations are to each other, we are talking about what is efficient and what is practical. Experts answer the questions of efficiency and practicality, and their is little to talk about. The debates may be easier, but they are meaningless.

The latest report of the Advisory Committee on Social Security just came out and all of the labor representatives oppose privatization. Deep down, the debate is ideological after all. Privatization will fundamentally weaken our commitment to collective security in favor of a system that leaves everyone fending for themselves, and everyone paying the costs. In a climate where everyone laments the breakdown of community and family, perhaps we should think twice before kicking the legs out from under the pooled commitment to support our elderly. If you throw your support behind privatization do so because you believe in the principle, not because you have been scared into thinking that it is the only option. The New Republic has got it right. Social Security has far less to fear from its accounting deficiencies than it does from the privatizers riding to its rescue.

Thomas C. Rollins is a junior living in Lowell House.