by John M. Curtis
(310) 204-8700

Copyright February 3, 2005
All Rights Reserved.

ttempting to cash in on political capital earned on Nov. 2, President George W. Bush used his State of the Union Message to sell a controversial overhaul of the 70-year-old Social Security system. Bush takes the baton from his Republican predecessors hoping to once-and-for-all steal the crown jewel from Franklin D. Roosevelt's New Deal, giving American workers a modicum of retirement security. Social Security was set up as a defined benefit pension plan with the government, not the retiree, owning the principal. Like an annuity, the retiree gets a fixed monthly benefit for life but has no equity to pass onto heirs. That's the beauty of the existing plan: Retirees opt for the security of monthly income without owning the funds. Now Bush wants to privatize a portion of Social Security contributions, robbing the system of the very funds needed to pay monthly benefits.

      Bush believes privatizing Social Security solves the system's long-term insolvency, when, in fact, it guarantees its destruction. Bush's plan, in essence, gets the government out of the Social Security Business. However much gets privatized, that's less the government has to pay. Bush has no problem cutting Social Security benefits or other government entitlements but won't cut whopping subsidies to the defense or oil servicing industries. Why is it OK to cut government payments to individuals but not OK to cut payments to corporations? There's no name for the government's longstanding financial program for the defense industry. Yet Social Security and Medicare are on the GOP hit list for fiscal discipline. Where's the government's fiscal discipline when it comes to the defense and oil services industries? Bush made it clear he has different priorities.

      Bush told lawmakers reforming Social Security “will require an open, candid review of the options,” yet has ruled out increasing payroll taxes. Current payroll taxes for Social Security are capped at only $87,000, namely, the government only takes 12.4% up to a maximum of $87,000. Those earning more pay only on the first $87,000. Lower wage earners pay a higher fraction of their total income to Social Security. Bush got a standing ovation for privatizing Social Security from millionaires in Congress currently collecting benefits while getting hefty government salaries. Bush worries about Social Security's possible insolvency while, simultaneously, borrowing from the trust fund. Gainfully employed seniors—regardless of their wealth—shouldn't get Social Security in addition to their earnings. Social Security wasn't designed for multimillionaires or people of extravagant means.

      Instead of looting the system, Bush should really open his mind to the fact that millions of Social Security beneficiaries don't need the money. Should multimillionaire former presidents collecting whopping government pensions also cash Social Security checks? Privatizing Social Security defeats the whole purpose of keeping money in the system for the next generation. It's not an “open mind” to rule out ending the arbitrary $87,000 ceiling, requiring wealthy workers to pay their fair share. Bush knows he must strike while the iron's hot to sell his new plan. In less than two years, House members and Senators face reelections, leaving Social Security a dangerous tightrope. Mild mannered Senate Democratic leader Harry Reid (D-Nev.) has already signaled that Democrats won't support Bush's plan to allow younger workers to open private accounts and opt out of the current system.

      Bush failed to mention the historical context in which Roosevelt created Social Security. He said nothing about the 1929 stock market crash that led to the great depression. Asking younger workers to invest a portion of their retirements in the stock market exposes new levels of risk. Just ask the millions of investors whose retirements were liquidated after the last market meltdown in 2000. Bush talks about private accounts involving “bonds and conservative mutual funds,” but many investors lost their shirts in the most “conservative” investments. If Bush really wants to sell private accounts, he needs to advocate government insurance to protect investments. Without the same insurance offered to the savings and loan and banking industries, stock market investing remains too risky. Ignoring the need for insurance proves that the stock market isn't the right place retirement accounts.

      Passing tax cuts were Bush's big legislative success during his first term. Staking his hopes on overhauling Social Security practically guarantees he won't have much to show in his next term. In its current form, Bush's Social Security plan is dead-on-arrival. “He's betting his whole second term on his ability to privatize Social Security,” said John D. Podesta, White House Chief of Staff in the Clinton Administration, signaling that foreign policy—especially Iraq—will dominate Bush's next four years. There's nothing wrong with encouraging younger workers to plan for retirement. Reinventing Social Security, or worse yet, getting government out of the retirement business, won't protect workers facing retirement. “Almost everything has to go right to get anything this hard done,” said House Majority Whip Roy Blunt (R-Mo.), admitting that Bush's plan is already in trouble.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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