Wednesday, August 17, 2005
"It's Time To Fix Social Security"

In his op-ed, "It's Time To Fix Social Security," Jay Ambrose argued that Congress needs to begin to seriously address the issue of the long-term viability and solvency of our federal Social Security system. He also praised George Bush's privatization plan and blamed the Democrats for "demagogic obstructionism" in preventing the President's individual private account plan from being enacted into law.

Conversely, in his op-ed, "Social Security Lessons," Paul Krugman claimed that Bush 'lied' about the current system, and used taxpayer money to promote his partisan agenda, attempting to transform '... Social Security from a social insurance program into a mutual fund.'"

Both Ambrose and Krugman were clearly partisan in their rhetoric, but each touched upon important points. Ambrose was correct in his demand that Congress address Social Security solvency, but was absurd in blaming only the Democrats. For successive Administrations and throughout dozens of Congressional sessions, Democrat and Republican politicians in power have ignored the need for long-term viability of our most important retirement safety net for literally millions of Americans.

Krugman was correct in his claim that the current Administration, which has a long and despicable record of attempting to privatize everything that doesn't move and some things that do, is working hard to shift the responsibility for Social Security from the public to the private sector, a private sector driven only by self-interest and money, not collective responsibility and care.

A solvent retirement or pension plan needs to be actuarially sound and committed to growing sufficiently to be able to pay benefits to current and future beneficiaries. Normally, retirement plans adjust their actuarial tables based on projected mortality rates, beneficiary levels, new money coming into the system, portfolio appreciation, and interest rate assumptions. In the case of the Social Security fund, investments are only made in U.S. treasury securities (100% principal and interest guaranteed), and any shortfall in meeting benefit payments will come out of the federal budget.

Thanks to the intelligence of George Bush and his Republican Party majorities in Congress, our country is presently running enormous and growing annual federal budget deficits (propped up, I might add, by a Social Security Fund surplus) in addition to outrageous monthly foreign account deficits. Also one of the major reasons why the deficits are growing is the cost of the war in Iraq and the privatization of government. Add to this plague on our federal budget, interest on the national debt and huge tax breaks given by Congress to the wealthy that run corporate America, it is no wonder that we can't feed, educate, care for, and employ our country's citizens.

As we have all known, fewer and fewer workers are paying into Social Security to support an increasing number of beneficiaries. This will be another drain on the budget once the current Social Security fund surplus is depleted, we have a "pay as you go" retirement system, and the return on U.S. Treasury bonds barely keeps up with the rate of inflation. The answer, however, is not privatizing Social Security with personal accounts as King George would have us believe.

There are several reasons why the current Administration, many Congressional representatives (supported by lobbyist money), and the corporate elite in this country want to privatize Social Security. First, creating private accounts that allow future beneficiaries to invest in stock mutual funds will inevitably, in the long run, be a gold mine for the financial services and mutual fund industry. It is a great big payback for all those corporate and wealthy citizens that contributed millions to King George and our current crop of politicians. Don't believe such personal account investments will be limited to "conservative" stock index funds. Once the financial services industry gains access to Social Security assets, those highly paid lobbyists in Washington, D.C., will make sure politicians open Social Security accounts up to permissible investments in everything from hedge funds to emerging markets. It won't be long before "partial" Social Security privatization becomes "full" privatization. Never underestimate the power of money and greed.

Secondly, privatization of Social Security will shift the burden from a public sector life-saving insurance and retirement program to a private sector roulette-style lotto game, where few will win and most will lose. There will be no minimal benefit level; every man and woman will be for himself and herself. This will reinforce authoritarian capitalism's reach beyond simple "privatization"”; it will be Thomas Hobbes's materialistic dream come true. His most famous philosophic phrase will become reality: that life (in America) in the state of nature will be "solitary, poor, nasty, brutish and short."

Finally, corporations and the wealthy have so skewed the budget priorities away from human services, education and welfare, to now paying for war, corporate contractors and rich folks' tax breaks, that any future federal support for Social Security diminishes their ability to dig deeper into American taxpayer pockets. God forbid, we subsidize our country’s retirees, when we can subsidize General Electric, Lockheed and Halliburton instead.

To strengthen Social Security, why not create a Social Security Retirement Board (SSRB), independently appointed and/or elected, whose members have fiduciary duties and responsibilities, among other things, to invest beneficiary assets into a diversified portfolio of stocks, bonds, real estate, private equity and other investments to increase portfolio performance? Such investments could include small businesses, alternative energy, federal mortgage securities supporting moderate income housing, as well as community investments to strengthen and increase wealth in local neighborhoods and in rural and urban communities across the country.

Similar to fiduciaries of private pension plans covered by ERISA, SSRB trustees should each be financially and legally liable and responsible to beneficiaries in carrying out their duties to meet the investment goals and the long-term obligations of Social Security.

The Board’s duties and responsibilities would be similar to large public employee pension plans, such as CALPERS, CALSTRS, and the New York State Retirement System, all of which have excellent long-term investment performance and have successfully been meeting their investment goals and objectives for current and future beneficiaries.

If the President is really concerned about making sure that the Social Security system is financially solvent and sound, what could be more important than increasing the performance of retirement assets? But this must be accomplished collectively, responsibly investing for all the beneficiaries, not putting each individual alone open to speculation and with each beneficiary hoping to win the lotto. Assets need to be managed by legally and financially liable fiduciaries, whose responsibility it is to invest beneficiary assets to meet the goals and objectives of providing retirement income, not as a transfer of Social Security assets to the financial community as a payback for political contributions and lobbyist lunches.

Until and unless we stand together as Americans, taking care of our elderly parents, family, and friends as one nation united, we shall continue to be divided by fortune, income, and class, where the overriding American philosophy will be individual self-interest.

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