by Dale Coberly
How They Lie To Us
The Wall Street Journal in the article Newtitlement State is unhappy with Newt Gingrich’s plan to privatize Social Security. Not only does it know that “privatization” failed when Bush offered it to the country, but they understand that most elected Republicans have distanced themselves from private-account carveouts as well. Rather than embracing them, Florida Sen. Marco Rubio, whose election was one of the Tea Party’s biggest victories in 2010, said during his campaign.
“Privatization of the accounts has come and gone. There are other alternatives, such as [raising] the retirement age, how you adjust payments in the future, ‘need’ measures, et cetera.
What this means is that “privatization” was never more than a political strategy to kill Social Security. It failed, and now we have a better plan to kill Social Security that won’t cost so much.
Here’s what the Journal said about Gingrich’s plan
The irony of Social Security is that its slow-motion solvency crisis is relatively easy to resolve—and the political system is moving toward consensus, if haltingly…. Personal Social Security accounts are desirable, but that doesn’t mean it makes sense to reject compromises that reduce future liabilities. Yet Mr. Gingrich proposes no such changes in his plan, perhaps because they are politically unpopular. But such an abdication opens him up to charges that he’s not serious about reform and that he has no plan to pay for the transition costs of going to personal accounts (that is, when younger workers put their money in their own accounts, rather than funding current retirees).
This is so subtle and so dishonest that I thought it would be worth the time to deconstruct it.
“Its slow-motion solvency crisis” … note that this assumes there is a solvency crisis. In fact there is not one. Social Security is not insolvent and can never be insolvent. With no changes whatsoever it can pay future benefits that are adequate by today’s standards, benefits which will be in fact greater in real value than today’s benefits.
Well 25 years is coming soon enough that folks are starting to notice that it will happen before or during their own retirement. The defenders of SS need to learn that 2036 is not a crisis, not because it is so far away, but because it never meant anything in the first place.
At about that time the Trust Fund will have done its job: helped pay for the boomer retirement, and will run out of money just the way your Christmas Fund runs out of money on or about December 25. After that Social Security goes back to regular old pay as you go financing, the way it was designed to work.
Because IN THE MEANWHILE life expectancy has been increasing, the disappearance of the Trust Fund will not cause, but will unmask, the need to increase the tax rate to pay for that increased life expectancy IF the workers of that time want to keep a replacement rate that reflects the INCREASE in their standard of living since the last time the tax rate was set. If they decide they will want to do this, the easiest and fairest way to accomplish it would be to start this year with a raise of forty cents per week, and to increase the tax another forty cents per week each year… while their wages will be increasing about eight dollars per week each year.
“is relatively easy to resolve.” Yes, of course it is. A tiny increase in the tax rate would do it. An increase so small no one would even notice it. But that’s not what the Journal means. They mean it would be relatively easy to cut benefits, or raise the retirement age, or “means test”. All of these would destroy Social Security and cause misery to hundreds of millions of people over time, but they would be “relatively easy” to enact.
“the political system is moving toward consensus,” With a billion dollars of Peterson money behind the “consensus” the political system is indeed moving. But this does not mean that “consensus” means either that honest people are realizing this is the best way, or that the people… as opposed to the politicians… are in favor of this. But, as the Journal knows, slip in the word “consensus” and readers will feel, if not think, that “everyone knows…and so it must be so.”
“Personal Social Security accounts are desirable,” This is almost “subliminally” slipped in. You won’t remember where you heard it, but “personal accounts are desirable” will stick in your brain unexamined. ARE personal (not private, of course, personal) accounts desirable? Well no. But you aren’t going to get to see an honest debate about that. You will just “believe “ it when the time comes. Personal accounts are not INSURANCE, which is what Social Security is. A personal account is exactly what the people had before the great depression taught them a lesson that no one alive now remembers very well. The depression taught people that some kind of retirement insurance was necessary to prevent very widespread poverty among people too old to work, or too old to be hired. With a personal account you might get a little richer than you will from the same money put into Social Security, or you might get a lot poorer. There is no reason you can’t have a personal account in addition to your Social Security insurance… but they don’t want you to think that.
“that doesn’t mean it makes sense to reject compromises that reduce future liabilities.” But “future liabilities” means “future benefits.” And just what is being compromised? You are saving yourself a forty cent tax increase for the “compromise” of getting benefits cut about 200 dollars a month at a time in your life when that will really hurt, or having two years added to the time you HAVE to work for the boss, even though you paid, or could have paid, for your own retirement. Note that no one is stopping you from working extra years if you want to. SS is insurance. It’s there in case you can’t work longer. Or don’t want to work longer…. remember, you paid for it.
“ Yet Mr. Gingrich proposes no such changes in his plan, “ Note that “compromises” has become “changes.” Benefit cuts. means testing. work, if you can find work, until you drop.
“ perhaps because they are politically unpopular.”. Yes, it would be a shame if the people were to be allowed to have their opinion heard. Much less be informed about what their choices are. You see, the only way we can save the country is to lie to the people and take away their right to save for their own retirement.
“such an abdication opens him up to charges that he’s not serious about reform and that he has no plan to pay for the transition costs of going to personal accounts “ Ah, there’s the rub. After the failure of he Bush “personal accounts” plan, the enemies realized they could could kill Social Security without incurring the “costs of transition.” Simply cut benefits, raise the retirement age, impose means testing… so that the program will no longer work as insurance sufficient to allow people to retire. This would force them to try to beat inflation and the markets on their own… without “the government” incurring any transition cost. A win win… for the people who hate Social Security.
“that is, when younger workers put their money in their own accounts, rather than funding current retirees.” And here is the father of lies. With Social Security workers already “put their money in their own accounts.” It happens that “pay as you go” DIRECTLY funds “current retirees.” But that doesn’t mean the workers are paying for someone else’s greedy granny. They are paying for their own retirement. Workers who “invest” in stocks and bonds are “funding current retirees”… who live off stock and bond returns. The only difference is that with Social Security the workers are guaranteed that their own retirement will be paid for when they need it.
The United States of America has more assets than any stock or bond can claim to have. In the case of Social Security the “asset” is an infinite supply of new workers who need to save for their own retirement in the only plan that protects their savings from inflation and market losses, and certain kinds of personal misfortune. They no more..or less… “pay for” current retirees than an unending supply of new customers “pay for” the retirements of those who own the stocks and bonds issued by a corporatioin.
But you need to think. With SS you pay your insurance premium and a record of that payment is recorded in your name. When you come to retirement, the total of your contributions is automatically adjusted to equal the average growth in the economy, which includes both inflation and real growth in wages. Your benefit is calculated based on your adjusted contribution. It is “paid for” (directly) by the contributions of those still working… who will get the same good deal you are getting. But while they are “funding” the system, they are not “paying for” current retirees. The current retirees already paid for themselves. Current workers are paying for themselves.
Or they were until the enemies of Social Security came up with the truly brilliant plan of killing Social Security simply by giving the workers their savings back to fritter away. They promise to make up for your lost savings by borrowing the money and taxing the rich… turning Social Security into welfare as we knew it. Welfare is something they already know how to kill in the dark.