SEARCH
Don’t Believe Wall Street Hype About Social Security |
|
 |
|
Earlier this week, the Social Security Board of Trustees released the 65th annual report on the program’s financial status.
And on cue, the Bush administration and the Wall Street-knows-best crowd—now joined by Sen. John McCain (who acknowledges ” economics is something I’ve never really understood as well as I should”)—used the occasion to push for privatizing Social Security. You know, turning over seniors’ retirement security to the stock market’s financial wizards who supposedly will show a bit more fiduciary acumen than the folks who presided over Bear Stearns’ crash and burn.
(Click here for more on McCain and Social Security privatization. On the Democratic side, Sens. Hillary Rodham Clinton (N.Y.) and Barack Obama (Ill.) oppose privatizing Social Security. Go to Working Families Vote 2008 to find out more about the candidates and the issues.)
Bush and his cohorts in 2005 failed miserably to convince the American public that Social Security privatization was the holy grail of retirement security. But still, they persist in trying to sell this snake oil.
Lets take a step back from the mainstream media headlines about “Bleak Outlooks” and “Grim Reports” and look a little more closely at where Social Security actually is and where it will be down the road.
Robert Greenstein, executive director of the Center on Budget and Policy Priorities (CBPP), and CBPP chief economist Chad Stone analyzed the Social Security trustees’ report and say that while there will be some challenges down the road, we are far from crisis mode. Instead, it’s more likely the real 800-pound gorilla in the nation’s financial future is the Bush administration’s tax cuts, aimed mostly at the rich. Greenstein and Stone write:
The trustees’ report reaffirms that Social Security does not face a near-term crisis and can continue to pay full benefits for more than three decades but will eventually face a significant imbalance.
The program will be able to pay 78 percent of full benefits when the trust fund is exhausted in 2041 (compared with 75 percent under last year’s projections). At the end of the 75-year projection window in 2082, Social Security will still be able to pay 75 percent of full benefits.
Anyone concerned about Social Security’s long-term shortfall ought to be equally (if not more) concerned about the long-term fiscal impact of extending the 2001 and 2003 tax cuts. Making the tax cuts permanent will cost more than three times as much, over the next 75 years, as the 75-year shortfall in Social Security.
The CBPP analysts say the policymakers concerned about future fiscal challenges should focus on a much broader picture than just Social Security, including the soaring costs of the U.S. health care system and overall government revenues—revenues Bush’s tax cuts for the wealthy eliminated.
Greenstein and Stone point out that just by ending the Bush tax giveaway to the top 1 percent of Americans—those making more than $450,000 a year—the government could make up nearly the entire cost of the projected Social Security 75-year-shortfall. The say the additional revenue coupled with other modest changes cold restore Social Security solvency.
Dean Baker, co-director of the Center for Economic and Policy Research (CEPR) in Washington, D.C., has a bit more blunt take on the Bush administration’s Social Security report.
There was nothing in these reports suggesting any qualitative deterioration in the financial state of these programs compared to their situation last year. The trustees claim…”that financial pressures will begin much sooner when the programs begin paying out more in benefits each year than they collect in payroll taxes” is simply a lie.
Click here to read Baker’s entire analysis.
4 Comments
Sorry, the comment form is closed at this time.
Everyone it seems wants to kill Social Security. Those that don’t, are rehashing old ideas that have not sold well in previous attempts.
I was thinking of another way to save the program from the defeatists and those lacking originality.
It is widely considered fact, that the recent actions of the Fed, stepping in before Bear Stearns could collapse is a good thing if, and this is a very big IF, they can hold the securities they guaranteed until maturity. I am not defending what the Fed did by any means and have been on the record as critical of most of their actions. But the guarantees they offered on the questionably valued securities might offer a glimpse into how Social Security could be saved.
Mortgage backed Securities, for those who may not know are bundled home loans that make money available to those who sold the loans in the first place to lend again. The problems began when the product was offered for sale. Since few had been sold, no one knew what they were worth and unfortunately, no one was willing to hold onto them until they matured. Because of this “thin” activity and the unfolding mortgage crisis, values plummeted. When the Fed stepped in, they secured these securities and created a value for them.
My proposal to save Social Security is this: Could these types of securities, which can be bought on the cheap, be a way to fund SS without buying Treasuries?
If the surplus in SS is be used to purchase mortgage backed securities and, if the program held them long enough, would be highly profitable. This type of purchase would remove the surplus from the hands of lawmakers with several certain side effects. The securities would attain a stable value relative to the underlying security, the home that backs the loan would be worth keeping (interest rates could be frozen on these loans once the new value of the security was established)and the economy would get the needed boost of stability.
Future MBS’s could be peddled to the program and would further stimulate the economy. Folks stay in their homes and the future of Social Security would be cemented in the American Dream.
Your thoughts?
This has real possibilities, but several conditions have to remain in place for long periods of time. Mortgage backed securities have to be guaranteed by the Federal government, much the same way as Social Security has in the past. They could not be bought for the sole purpose of being investments, which can be bought and sold at random. They must be guaranteed with a secure and fixed rate of return, and be used exclusively to fund Social Security, perhaps by the insured rate of return, much the same way annuities work. In this way, their value remains intact. Yes, there is real possibility here.
Legally, Social Security money can only be put into treasury bonds because they are the safest investment in the world.
I don’t want to risk my retirement benefit on sub prime loans.
You could buy some and let us know how well you do. Good luck.
If what I have heard is true, Polotitiners have been dipping into soc sec funds for years. if this is so then sue them to get the money back where it belongs.