Social Security: Is there a Crisis?
To summarize the article, “Social Insecurity”, in the March issue of “American Teacher”, a publication of the AFT, we have to ask ourselves if there really is a crisis in Social Security. Social Security trustees say the system will experience its first shortfall in the year 2018 and by the year 2042 will only be able to cover 73% of promised benefits. However, the Congressional Budget Office finds that in the year 2052, the system will have enough reserves to pay full benefits and will be able to cover 80% of benefits after that. The Congressional Budget Office finds that the trust fund could actually be solvent into the 22nd century, with no change in benefits, simply with additional revenue of 3% of federal spending. That is less than the U.S. is currently spending in Iraq and only one-fourth of the annual impact of President Bush’s tax cuts. Does the Social Security trust fund face problems? Yes, but the Bush plan for private accounts would only make it worse by diverting trillions of dollars from the fund. The AFT president, Edward McElroy has boldly stated “we should reject private accounts and drastic cuts in benefits for younger workers as the only solution to long-term funding of Social Security. This is the presidents approach toward eventual elimination of the Social Security system.”
In fact, private accounts do nothing to solve the long-term problems of financing Social Security. President Bush doesn’t want Americans to realize that private investment accounts are actually designed to weaken the system and cause drastic benefit cuts. They will amount to massive debt that our future generations will have to pay off. Dean Baker, of the Center for Economic and Policy Research, has stated, “The president’s pitch is that private accounts will yield higher returns than Social Security does. These claims are bad math, faulty logic and deception.”
When President Franklin Roosevelt first established the Social Security Administration in 1935, he was quoted as saying, “we put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.” President Bush, are you listening?
Several foreign countries have tried the private pension plans being promoted by the Bush administration. The private pension plan set forth by Margaret Thatcher for the United Kingdom, suffered from high fees levied on these private accounts so much that the government had to impose a “charge cap” on investment companies. To this day, fees continue to take a huge portion out of British retirement savings. The British Pensions Commission has warned that these charges can absorb 20 to 30 percent of an individual’s pension savings. The British Commission has stated that those who feel Mrs. Thatcher’s privatization plan solved the pension problem are “living in a fool’s paradise.” Several other countries such as Chile and Argentina found that privatization of pension plans has led to their nation’s worse economic crisis ever.
The AFT has stated that it will fight to protect and strengthen Social Security by assuring rock-solid funding to guarantee workers the benefits they have paid for. A few simple and reasonable changes to the existing Social Security program would make President Bush’s proposal unnecessary. The only losers would be the big investment and insurance companies that are in line to rake in huge profits from millions of potential account holders. The Bush administration seems to believe that there is a free-market solution to every problem. As stated in a New York Times January 2005 editorial, “That faith is misguided. For a society to be functional and humane, it is not enough that some people have the chance to be rich in old age. Rather, all old people, widows, orphans and the disabled, must have the dignity of financial security, and that requires universal Social Security coverage.”
As members of PMCT and being part of the American working class, we must contact our representatives to fight against privatizing Social Security. Our future and the future of our children and our students, depends on it.