Socialist Worker

Welfare in the US: Bush attacks pensions

While New Labour is attacking pensions, George Bush has launched a similar assault as part of his war on the poor. Dave Lindorff writes from the US

Issue No. 1939

SOCIAL SECURITY, the programme that has provided basic economic support for America’s elderly, disabled and orphaned for 70 years, is in danger. The danger comes not from “baby boomers” (that wave of people born between 1945 and 1960), but from a campaign of lies and fear-mongering, led by President Bush.

In his state of the union address earlier this month, Bush put the campaign to destroy social security to the fore, claiming that the system is heading for “bankruptcy” in 2042.

Like those mythical weapons of mass destruction in Iraq conjured up by Bush and his British yes-man Tony Blair, this was a flat-out lie.

First of all, even if the date were correct, all that would happen in 2042 would be that the trust fund used to pay out benefits to workers would be exhausted. Even then, current workers’ taxes would continue to cover 73 percent of promised benefits to retirees.

More importantly, that 2042 projection by the social security administration was a conservative projection made a few years ago based upon unreasonably low estimates of future economic growth.

And here’s what the president has not told people: if the cap on income subject to social security taxation, currently set at $90,000 in wages, were eliminated so all income was subject to the tax, there would be no shortfall in the trust fund—not in 2042, not in 2075, never.

The key fact that the president and right wing critics of social security have failed to mention is that by 2045 nearly all of the “baby boom” generation will have already shuffled off this mortal coil.

If there is no crisis, why are the president, right wing politicians and pundits, corporate leaders and the media all calling for “reforms” to “save” the system? They understand that the baby boom generation, as it approaches retirement, poses a crisis—not for social security, but for their political agenda.

They know that if they can effectively kill off the programme before it becomes a core issue, it will be much harder to re-establish it.

Consider this: just as there will be nearly twice as many elderly retirees collecting benefits when the wave of Americans born between 1945 and 1960 hits its retirement age peak, there will also be twice as many elderly voters.

While today’s seniors came of age listening to Perry Como in the politically quiescent 1950s, tomorrow’s retirees will be people who listened to Bob Dylan and the Beatles and cut their political teeth on the civil rights and anti-war movements of the 1960s and 1970s.

In a few years, we can expect to see an unprecedentedly large senior lobby that knows how to organise, knows how to take it to the street, and has demonstrated its ability to fight hard when its own interests are at stake (heck, we’ll probably have Mick Jagger and Bob Dylan writing political ballads about the need to improve retirement funding).

Meanwhile, the old private pension, which provided a set monthly cheque based on years worked and final salary, is vanishing. Since 2001, one quarter of the US companies in the top Fortune 1,000 list have announced plans to freeze their schemes.

Between 1995 and 1999, the number of companies offering such plans fell by 18 percent. Those companies that aren’t doing away with pensions altogether are replacing those old-style pensions with what are called “defined contribution” plans that pay out based upon what employees contributed, and on how well the resulting investment portfolio performed.

Given the sorry state of the private safety net, it won’t be long before a movement springs up among the new elderly and near elderly not just to rescue social security, but to radically transform it into a true retirement programme.

Tomorrow’s senior lobby won’t feel constrained by current law, which makes workers foot half the bill (we’re talking about their own kids, after all). We can expect to see more of the tax burden shifted onto employers.

We can also expect to see future Congresses pressured into passing legislation that will remove the income cap on the social securities tax, as well as making private pensions fully portable, so that employers can’t pocket years of contributions every time they let go of workers.

We can also expect to see a movement to expand Medicare from a feeble programme that only barely covers the medical care of the elderly to a full-fledged national healthcare programme that covers everyone.

That is a scary vision for corporations and the right, and it’s why Bush is pushing to wreck the system now. The president’s proposed “solution”—private accounts for younger workers—is nothing but a divide and conquer tactic.

It doesn’t solve the long term problem, and by most accounts would probably worsen it by removing some contributions that would have helped build up the reserve fund.

What it would do is leave older workers stuck with the current system, while weaning younger workers away with a promise of easy money and a lower tax bite. Then, with fewer people dependent upon classic benefits, it would be politically easier for a future Congress to slash those benefits, since younger workers with a private “nest egg” would be less affected.

It’s time to see the president’s attack for what it is: an attempt to destroy the most enduring legacy of the New Deal system of 1935.

Dave Lindorff is an award-winning investigative journalist. His latest book is This Can’t Be Happening! His website is www.thiscantbehappening.net

He writes regularly for radical webzine www.CounterPunch.org


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Features
Sat 19 Feb 2005, 00:00 GMT
Issue No. 1939
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