President Bush's compassionate war on behalf of the affluent society now includes a frontal assault on the New Deal's Social Security legislation. The privatization cat is not out of the bag yet, but the President will presumably offer a scheme somewhat like the Thatcher scheme that was instituted in Great Britain two decades ago and has, according to economic studies, further impoverished the elderly poor.
President Bush claims that the U.S. Social Security system will go broke in forty-some years. And, in about thirteen years, when Trust Fund expenditures will probably exceed income, the government will have to raise cash to redeem the paper it left in the Trust Fund, a papier-mâché piggy bank constructed with government paper. In sum, yet another crisis exists to perpetuate the state of permanent crisis the United States must have if great leaders are to have permanent employment. Great leaders, after all, have always thrived on divisiveness and not on compromising consensus
The most adamant opponents to Social Security "reform" aver that the performance of the traditional system has thus far been stellar: Why fix something that is not yet broken? Well, yes, the system might need some tweaking, at the very most. Wherefore it is claimed that the President's Social Security "crisis" is yet another pretext in a campaign to protect the monied class by taking advantage of the three greatest impediments to any successful democracy: ignorance, social injustice, and war
However, if the Social Security system is misconstrued - as an investment scheme instead of insurance to spread the risk of elderly poverty across the population - the crisis is not merely a pretext. If it is an investment scheme, the numbers do not add up - expensive days of reckoning will probably confront the younger portion of the present population. Even if we might avoid a real material crisis in the future by boosting productivity and by distributing the results more justly, we still have a serious psychological and moral crisis today. There exists in This Great Nation of Ours an increasing unwillingness of relatively comfortable people to comfort the less fortunate, particularly the elderly poor, especially if they are not one's own relatives. When President Bush plays Cassandra, the anxiety and unwillingness to be optimistic and generous increases.
The neoconservative utopia is a neo-Darwinian, just-deserts jungle where the haves deserve to have a lot and the poor deserve to be poor. When push comes to shove, faith-based charity and compassionate conservatism do not work; in fact it leads to more pushing and shoving. That is the greatest crisis impending, and it is something we had better address before it is too late for talk.
Despite their professions of compassion and their blind faith in voluntary charity, the neoconservatives certainly do not want government to fund the needs of the desperately poor as they arise, for they know very well where those funds would have to come from: they would not come from the have-nots, but from the haves. Profits, after all, depend on artificial shortages and a large number of desperately unemployed people willing to work at low wages. As far as the neoconservatives are concerned, there will never and should never be enough future production to care for the disabled, sick and aged.
The young generally agree with the assessment of the President and his advisors, that there is an impending Social Security crisis. To wit, there will soon be too many older people for the younger set to support at the present level, hence there will be little or nothing left for them when they retire. It will do little good to call them ingrates who do not want support those who built their foundation for prosperity; or to characterize them as lazy - would not the proper allocation of the high technology they love create an abundance that would provide at least food, shelter, and health care for the elderly poor including themselves when they come of age?
President Bush implies but does not promise that the younger generations will have plenty if only they will opt out of Social Security as we know it. They are led to believe that, if only they will invest at least a portion of their funds in the stock market, all will be well in the end. With that in mind, no doubt some of them believe they will probably live happily every after.
Of course, investors in “personal” savings accounts will be "allowed" to invest "their" funds only in "safe" stocks of indexed big corporations, not in high-flying issues of innovative companies. Ironically, the investment indexes might include government bonds, the safest form of investment given the government's monopoly on violence and ability to tax. But if government securities are so safe, why not invest all Social Security funds in government bonds, which are, if the People own the state, the People's promise to pay the People? Because investing Social Security funds in the government's promise to pay would be pretty much like the papier-mâché scheme we already have, so why change it? Why not go further, get rid of the veil by skipping the government paper, and be satisfied with what really is a pay-as-we-go system? Because people have been led to believe that Social Security is an investment scheme and not an insurance scheme.
President Bush has not really said that the private investment accounts would guarantee a future utopia for today's youth. The formal neoconservative political doctrine holds that lying is the only way to get big things done in a democracy, but that sort of lie would be too bald-faced for anyone but morons to believe it. Still, the deceptive suggestion is there, that younger generations would be better off with private accounts. The fact of the matter is, and the President knows it, is that the numerical problem is demographic, and that privatization is simply a scheme for cutting government-funded retirement benefits now, because, if the numbers predicted come to pass, the affluent class he over-represents would have to bear a much greater burden for the enormous surplus they now enjoy.
Alas, privatization will not solve the impending crisis of an aging society. Alan Greenspan is just plain wrong, and he should be put out on the Washington streets with $300 month, to meditate on the value of guaranteed Social Security benefits sufficient to keep the elderly poor above the poverty level. Increases in the productivity of things and of the production of more babies, and immigration of a larger service class, might help bolster up our traditional social security system because there would be a greater workforce to support retired people. But privatizing social security, in part or in whole, and speculating in the secondary stock market (buying and selling stocks that have already been sold) will not solve the social security predicament, which is an economic and moral problem involving future production and its distribution.
If funds are invested in productive endeavors and new means of production instead of the secondary market for securities, say, in initial offerings of innovative companies and in government scientific and technological research, much better returns might be had. When people do not save enough to adequately fund business investment, involuntary savings accounts might increase productivity - but there is no guarantee; that is what traditional social security is for.
We often hear the complaint that Americans do not save enough; even worse, they go too far into debt. Yet there still seems to be sufficient funds available to fund speculative bubbles every few years, such as the recent dot.com craze. We hear that billions were lost when the bubble burst. That is not true: the money was lost by the buyers to the sellers at the top of the boom. The money has moved into other things, fueling in part the current real estate bubble. Our financial history has vacillated between crazes and panics. When money for speculation is wanted, bankers are more than willing to create it while Alan Greenspan and the Fed look the other way. Greenspan’s forced savings argument does not hold.
The privatization concept is generally bolstered by the assumption that corporate bureaucracies are a lot better for us, are more effective and efficient than government bureaucracies. People are naturally greedy, it is assumed; and when they are free of governmental restrictions, they will compete with one another and will, like busy bees, somehow organize themselves to do the best for one another. In any case, each person will get what he deserves if only the government keeps its hands off the process. But that is not democracy. Business corporations are virtual dictatorships. We do not vote for corporate leaders, including the leaders of banks and investment firms. Morons might think that our social welfare is safer in the hands of corporate officers whose interest is in the war of all against all, than government trustees whose interest is, constitutionally, in the public welfare.
What is to be done, if anything? Liberal-minded people might start by reading their local liberal-biased newspaper for ideas. For instance, the editors of the prize-winning Miami Herald, Executive Editor Tom Fielder and Editorial Page Editor Joe Oglesby, have presented a series on Social Security:
"Our preferred solution is increasing the ceiling on income subject to payroll taxes," the editors stated. They recommend raising the ceiling from $90,000 to $200,000, and they believe that the higher ceiling, taxed at the same rate, 6.2%, will do the trick. That would of course place an even higher absolute burden on higher income levels. That would be fairer, as far as liberals are concerned, although the more liberal ones among them might prefer the rate to be progressive instead of regressive (flat), so that higher incomes would be taxed at higher rates, say at 10%, and a few liberals would move the ceiling up to at least $2 million a year.
The Herald editors reject the possibility of reducing benefits for those wealthier retirees who might want to add public welfare benefits to their large nest eggs but do not really need them:
"This undermines the idea of a 'universal' benefit and puts the burden for fixing the problem on a relatively small number of the economically active population," the editors claim.
Of course the editors pay tribute here to the market needs of their masters, some of whose salaries are obscene. Their suggestion, that the masses of employees below are not members of the “economically active population” is absurd and insulting, and reveals the true colors of the “liberal” editors – they are wolves in sheep’s clothing. In any case, the "universal" aspect of a good social security program is that it spreads the risk of misfortune throughout the entire population; some would argue that the more fortunate should pay a higher rate.
If the system must be radically reformed, we should go back to its radical root, abandoning the notion that the conservative or traditional social security scheme is some sort of universal investment scheme instead of insurance against dire poverty in old age. The universal risk of failure should be spread over the entire population. The “premium” (tax) would be a flat tax on gross income without lower or upper limits. Only those persons who need support would receive benefits. In other words, the social security system would be a social welfare program that would make sure that senior citizens do not become destitute and left out on the street to starve. Only those qualified by need would be able to draw on it, effective on the date the President signs the legislation - there would be no transition costs.
As for private investment accounts, that is the business of the individual – there would be no forced savings. Individuals should be truly free in a free democracy to invest their money in whatever tax-exempt accounts might exist for the purpose.