Monday, January 03, 2005

Social Security privatization: the new Iraq? As today's New York Times editorial makes clear (indirectly), the Bush administration's efforts to stampede Congress into backing so-called "partial" privatization of Social Security has all the hallmarks of our rush to war. That point was also crisply made by the Washington Post's Richard Cohen in his column, "Social Security Slam Dunk." First, they promote scary "facts" -- a $10 trillion shortfall -- and then say the crisis is immediate. Just like all those nuclear reactor rods and other "hard" evidence showing we were under imminent threat of WMDs. It turns out that the $10 trillion shortfall is a made-up estimate if the current system was projected into infinity, not just the next 75 years. An actuarial association wrote to the administration to say that such estimates had no value, but the administration is just ignoring those expert opinions, just as it threw into the the trash State Department "Future of Iraq" and other authoritative reports on the need to provide enough American manpower and troops to secure a post-war Iraq. They had a fantasy to fulfill then -- happy Iraqis garlanding us with roses and ushering in democracy -- and they have a new fantasy: workers enriching themselves in the stock market as the need for government-paid Social Security withers away.

We'll see the equivalent of the Iraqi turmoil on the domestic front when today's workers discover their "investments" won't cover basic needs when they're older, and, much sooner than that, government programs starving because of the $2 trillion shortfall in government revenues because of funds shifted out of the Social Security system. What I mean is that there won't be Iraqi-style car bombs or elderly people rioting in the streets because their Social Security benefits won't pay their heating bills,but that the Bushies' unrealistic plans will clearly be in a disastrous free-fall, as in Iraq. All this doesn't mean that we don't need to adjust the program -- say, by, means-testing -- or extending retirement age, but it's not worth gutting a longstanding program just to see if the wishful thinking of privatization zealots might come true. Who will b0e the domestic version of Richard Clarke, a government insider to step forward and blow the whistle on this administration's crackpot Social Security schemes?
The New York Times > Opinion > Editorial: The Social Security Fear Factor

Update: Paul Krugman focuses on the phony nature of the Social Security crisis in this Monday's column. Some excerpts:
"Today let's focus on one piece of those scare tactics: the claim that Social Security faces an imminent crisis.

"That claim is simply false. Yet much of the press has reported the falsehood as a fact. For example, The Washington Post recently described 2018, when benefit payments are projected to exceed payroll tax revenues, as a "day of reckoning."

"Here's the truth: by law, Social Security has a budget independent of the rest of the U.S. government. That budget is currently running a surplus, thanks to an increase in the payroll tax two decades ago. As a result, Social Security has a large and growing trust fund.

"When benefit payments start to exceed payroll tax revenues, Social Security will be able to draw on that trust fund. And the trust fund will last for a long time: until 2042, says the Social Security Administration; until 2052, says the Congressional Budget Office; quite possibly forever, say many economists, who point out that these projections assume that the economy will grow much more slowly in the future than it has in the past."

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