Wall St. makes grab for Social Security

By Fred Gaboury, in People's Weekly World,
7 December, 1996

NEW YORK - Defenders of Social Security this week denounced plans to privatize the program that pays benefits to 43 million Americans, including four million children and an equal number of disabled persons.

Their concerns were given a new urgency when Senate Minority Leader Tom Daschle (D-S.D.) endorsed the concept of privatizing Social Security. He added that he "would not be surprised" if Congress passed a scheme this year allowing the government to use money from the Social Security Trust Fund surplus to play the stock market. He said it would result in giving people "a better return on their savings."

Terrance Carroll, president of the National Association for Public Health Policy, was quick to criticize Daschle. "The massive transfer of funds from the public purse to the greedy investors that resulted from the savings and loan disaster should serve as a warning that avarice is not a sound motive for public policy," Carroll said.

"Privatization of public programs and public responsibilities benefits only the few and is very costly to the many - and Senator Daschle knows that, or at least he should."

Dixie Horning, executive director of the Gray Panthers, said the reasoning behind the campaign by Congressional Republicans and Wall Street to allow using the Social Security Trust Fund to gamble on the stock market was simple.

"Those who have money want more," she said. "Privatizing Social Security may help some but it puts in jeopardy more people than it helps."

Horning told the World those leading the drive to give Wall Street a slice of the $400 billion collected annually in Social Security payroll taxes were trying to "construct reality" with the claim that the program is going broke and that radical steps must be taken to "save" it.

"The Social Security Trust Fund is more solvent than any private pension plan," she said.

"If you stop to think about it," Horning said, "many of the so-called remedies to make changes in the structure and operation of Social Security are a ploy which hides the real problems in the social structure of our society."

A Social Security Advisory Council appointed by President Clinton two years ago has proposed three "solutions" to the "crisis" in Social Security. One, supported by six of the Council's 13 members, would allow the government to invest as much as 40 percent of the Social Security Trust Find surplus in commercial stocks, and bonds or mutual funds.

A second, supported by five council members, would require each worker to establish a "personal security account." Nearly half of the present Social Security payroll tax of 12.4 percent would be diverted to these accounts, with the individual left to make investment decisions. Under this plan Social Security would provide a flat benefit of about half the current average plus what ever return the personal fund provided.

A third option, supported by two members of the Council, would maintain the current payroll tax and benefit structure of Social Security. This option would impose an additional payroll tax of 1.6 percent to be invested in individual accounts with administration of these accounts left with the Social Security Administration.

Patrick Burns, director of communications for the National Council of Senior Citizens, told the World that whatever problems there may be with the existing program were "modest" and that the so-called crisis was "almost entirely contrived." He said he hoped that Daschle was "speaking without notes" and was not "formally committed" to privatization.

Burns said there were a lot of unanswered questions: "Who will make the decisions? Will they buy stock in tobacco companies?" he asked, adding that he saw a contradiction in the right wing drive to privatize Social Security. "On the one hand they tell us that government can't deliver the mail. On the other, they say it can do a perfect job when it comes to playing the market."

Burns' concerns were echoed by Lisa Davis, a policy analyst at the National Committee to Preserve Social Security and Medicare (NCPSSM). "Perhaps privatization under which the government does the investing holds some promise," she said, "but we have to be cautious. The whole process needs to be looked into with a great deal of care."

Davis said while her organization had not taken any formal position on any of the three positions, "we are adamantly opposed to individual accounts. Our priority is maintaining a social insurance system that protects the poorest and most vulnerable of the senior population."

Daschle's retreat follows an election where supporters of privatization laid low and where candidates from both parties avoided discussing the question. Now, with the election over, pro-privatization forces hope to take advantage of the report of the Social Security Advisory Council.

According to the Wall Street Journal, outfits like the Cato Institute have dumped millions of dollars into the effort to replace Social Security "with scores of millions of individual retirement accounts earning higher returns for savers - and millions of dollars in commissions for money managers."

In what opponents call a "stealth campaign," pro- privatization groups are sponsoring public-policy forums and bankrolling think tanks to put an intellectual face on the issue, hoping to steer a national debate that will enable them to make the sale. "Overt lusting for this would be self defeating," Rep. Earl Pomeroy (D-N.D.) told the Journal.

In a position paper published by the NCPSSM, Davis wrote: "Invariably, advocates of privatization analyze Social Security in the context of savings plans and/or pension plans. It is neither, and most 'rate of return' or 'money's worth' analysis are fundamentally flawed because they fail to consider the insurance aspects of the Social Security program.

"Unlike private accounts, Social Security intentionally returns more to low- and average-wage earners than it returns to those who have had high earnings. This aspect reflects its important social purpose," Davis said.

"Any reasonable 'money's worth' analysis of the Social Security system must take into account the relative value of disability and survivor insurance as well as retirement benefits. If a 27-year-old worker, with average earnings and a spouse and two children could purchase comparable policies on the private market today, he or she would have to buy at least $203,000 in disability coverage on top of a $295 survivors benefit policy," Davis said.

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