Soshil Shmecoorootie

You have to think outside the box. That's because you've been told another Big Lie, which even has the experts believing it and recycling it. Of course, many of those experts and politicians have a hidden agenda or prejudices which make them inclined to believe and propagate this Big Lie. One of the best features of the Social Security Big Lie is that it sounds true.

I am bringing this up again, because of the media blitz about George W Bush's intention to privatize Social Security. I was asked today, what does that mean? As I understand it, here is Bush's plan:

1. Those now receiving Social Security will continue to receive it, but the amount of the benefit may decline faster than inflation. In other words, the old folks will "wither on the vine," to put it gently. (Dickens may have had harsher words about starving to death.)
    
2. Those in the 55-64 age group - BOOMERS - will get decreased benefits, and will have to grow older to get it - even older than the current schedule. They will also be subject to the ever-decreasing value of their benefits.
    
3. Those under 55 will get a declining schedule of benefits at an ever later age: the younger you are today, the less your eventual benefit will be, considered relative to the current benefit schedule. Conservatives have been propagandizing youth for decades, preparing them to expect no Social Security at all. It's much easier not to serve that Last Supper, when you've been told not to expect it.

Those measures are designed to save us from the $74 trillion disaster, which figures prominently in Republican propaganda. If you believe there is a $74 trillion disaster, then maybe you'll be willing to undergo these drastic measures. It's like being willing to part with a breast, or testicles, or other body parts, if you are convinced you have a raging cancer.

But, what if the diagnosis is mistaken: you do not have cancer?

I would like to disabuse you of the prejudicial arguments and "facts" that are being touted about Social Security. First and foremost is the real fact, that there is no $74 trillion shortfall. That number is the result of certain very conservative, pessimistic. worst-case assumptions, taken over a 75 year period. Optimistic assumptions are just as likely, and indicate there is no problem whatever.  A reasonable guess is that a 1% increase in Social Security taxes would make the fund solvent for at least 75 years.

There is a hidden, fatal flaw in the conservative argument against Social Security. That flaw is the ASSUMPTION that the program is an ANNUITY, and can be analyzed thusly. All of those shortfalls arise when Social Security is considered as an annuity, and not otherwise. Now, what does that mean?

An annuity is usually an insurance program, funded (capitalized) in advance, which provides an income at a later date. We also speak of Corporations as having an "annuity income," when they receive regular payments in consequence of past investments. For example, SYMANTEC charges an annual premium to renew its NORTON ANTI-VIRUS service. That service yields an "annuity income," which is similar to the "residuals" actors are paid for each showing of their work.

The important thing about an annuity is that it is paid in upfront; the benefits are paid out later. Factors that affect annuity benefits include interest rates and inflation, and whatever capital gains are earned on amounts invested. Interest can accrue on balances paid-in, but the cash balance may have a reduced buying power as monetary inflation erodes the currency. If the paid-in amount is invested, the money manager may realize capital gains (or losses), as well as dividends or other investment credits and debits.

Now that we know about annuities, here comes the non-sequitur: Social Security is NOT an annuity!

That's right: Social Security is not an annuity. Social Security never was an annuity. Social Security is not going to be an annuity. Social Security was conceived as a pay-as-you-go program, which means that current taxes are supposed to pay for current beneficiaries.

The truth is Social Security has been OVER FUNDED for decades. That's right, over funded! That means the Federal government has been collecting more Social Security taxes than the program costs. It will keep on doing this until about 2013, when the cost will break even with the taxes. The ASSUMPTION (that word again) is that the over funding would be invested, so reduce future taxes.

In reality, the over funding of Social Security started in 1983, during the Reagan Administration, when the Greenspan Commission recommending raising the payroll taxes. That Commission also recommended raising  the retirement age. The Commission was dominated by Alan Greenspan, and those who viewed Social Security as an annuity. So, for 20 years, working people have been paying increased Social Security taxes to fund an annuity that doesn't exist, and paying taxes to fund a Social Security deficit that doesn't exist, either.

Since then, the taxes collected were "invested" in the Government. The Federal government "borrows" the surplus Social Security taxes, and returns a Treasury note or bond. These securities are then sold to the public. The proceeds are then credited to the Social Security fund. This scheme allows the Federal government to borrow money at below-market rates.

When the taxes were raised after 1983, the working classes paid more. "Working class" means the bottom half of the adult population. Today, that's people whose household income is less than about $43,000. So, to summarize, since 1983 the increased Social Security tax has been paid by those with the lesser household income, who will get a reduced benefit after working longer for it. This method of taxation prevented the need for raising the income tax, which would have hit the rich (the upper half of incomes) as well. Thus, the working stiffs paid more taxes and floated the government, during the Reagan-Bush years of huge deficits. And, all this, because people let slip past them the idea that Social Security is an annuity. Which, to repeat, it is not.

How has all this come to pass? It is all the work of conservatives, Republicans. When I was a child, growing up in a 95% Republican town, I overheard many conversations about hating FDR. The town's elders not only hated Roosevelt, the man, they hated Eleanor, too, and everything those two ever did. They detested Social Security, and anything that benefitted the working people. Most of the rich I bumped into were snobs (class-ists), especially in those officially-approved racist-sexist days, who despised ordinary people. Growing up, I learned that one of the basic ingredients of conservatism is the feeling, 'I am better than you.' Naturally, being one of the few working-class children there, I found out soon enough who was the object of all that scorn. (And, I've never forgotten it.)

Conservatives have never relented in their vow to ruin the New Deal, and rid us of Social Security. Since Ronald Reagan's election in 1980, they have been very successful in getting their desires. Welfare, which is part of the Social Security Act, was abolished and its remnant defanged with the help of Bill Clinton, a conservative disguised as a Democrat. (Perhaps you are getting a glimmer of why I am not a Clinton/DLC supporter, and no longer a Democrat.) Unemployment benefits have been reduced and taxed.  The notorious Social Security COLA "was adjusted" and "reduced," so now it is less than 1/2 of actual inflation. Eligibility ages were increased. Disability benefits were made very difficult to get: you usually have to hire one of those "trial lawyers" to appeal the automatic denial.

Despite all those successes in destroying the memory of FDR, there is still Social Security. The Republican party has hit on a great scheme, thanks to Alan Greenspan, in changing your understanding and expectation of the program. That's the "annuity" concept. If they can convince you Social Security is really an annuity, then all those horrendous calculations make sense. Then, young people will come to believe they will never get it. Older people will feel guilty about collecting it. It is a brilliant scheme, and it is working. National confidence in Social Security is low.

Now, at last, ENTREZ M. BUSH! (Triumphal March from "Aida" here)  It is time to kill the beast with a final lunge; piercing its heart with the sword of Privatization. After that, you are responsible for your own retirement. You just buy your own annuity with all that money you put in the Bank (you know, what you got when the slots finally paid off).

There's lots more to be said about this. I will say it later. For now, the question is: can you afford this?