This copy is for your personal, non-commercial use only.

Fear Mongering for Privatization Social Insecuriy
Fear Mongering About Social Security
by DAVID LINDORFF

Here’s an interesting question: Why does the corporate media keep parroting rightwing pols and "experts" when they prattle on about a crisis in Social Security?

Take Business Week, which in its current issue runs an interview with new Bush Office of Management and Budget Director Josh Bolten. In a August 11 issue Q&A, Business Week Washington writers Rich Miller and Howard Gleckman quote Sen. Kent Conrad (D-ND) as saying that now is the last chance to reduce the national debt before the retirement of the baby boomers. Bolten replies that the Social Security and Medicare systems are "structured in a way that our resources ultimately will not be able to pay for them," and that "we need to take a very hard look at their fundamental structure."

Bolten goes on to say that while "the environment hasn’t been ideal to pursue a major change in social Security," that President Bush "will want to pursue it at the earliest opportunity" and that "reform" ideas are all "built around personal accounts."

Like the rest of the mainstream media, Miller and Gleckman don’t question Bolten about the nature of the alleged crisis in Social Security, nor do they challenge his assumption that the only valid approach is privatization.

In fact, if reporters would just talk to the technocrats, as opposed to the politically-appointed wreckers in charge at the Social Security Administration, they’d learn that the alleged "crisis" facing the system is no crisis at all.

First off all–the magnitude of the problem: the funding deficit facing the Social Security Trust Fund, which would see the system paying out more than it takes in, beginning in 2018 (thanks to the baby boom rise in retirees), and which would exhaust the Trust Fund in 2042, assuming no changes in payroll taxes or payout levels, could be completely eliminated by simply increasing the payroll tax paid by employers and employees by a combined 1.92 percent. That is, for a person earning $30,000 a year, the social security tax on employer and employee would have to be raised by $288 each.

How often have you seen that little number bandied about in the media when they talk about switching the system over to voluntary private accounts on which workers could lose their shirts?

But that’s not all. According to Social Security’s green eyeshade analysts, if the cap on income taxed by Social Security–currently set at about $80,000, were lifted, so that all income was taxed, even including paying out higher benefits to those rich folks paying the extra taxes (the same rich folks who just got the lion’s share of Bush’s mammoth tax cuts), almost all the Trust Fund’s looming deficit would be eliminated.

According to the analysts, it would at that point only require an increase in the payroll tax of 0.15 percent (divided equally between employer and employee) to completely close the gap. That would mean an extra Social Security deduction of $22.50 a year or about 44 cents a week on that $30,000 income.

But beyond this, there is the political matter of who could or should pay to solve the problem.

For some reason, the idea of having employer and employee share the contribution to workers’ Social Security on a 50/50 basis has been treated as sacrosanct. It’s been this way since the program’s inception, but the truth is, there’s nothing magic about this formula.

Instead of making workers pay more into the fund to prepare for the arrival of baby boomer retirees, why not shift the burden onto employers? For example, instead of increasing the tax on workers and employers by 0.96 percent to eliminate the future deficit, why not just hit employers with the whole 1.92 percent increase?

And while we’re at it, why not shift another 1.5 percent of the employee tax over to employers?

Conservatives, and many conservative economists, argue against such a shift in the calculus of Social Security taxation, claiming that shifting the tax onto employers would not really reduce taxation on workers. They claim that employers would simply take the higher taxes out in the form of lower wages or higher prices for goods and services.

This is false, however. If one assumes that the U.S. operates as a free labor market, wage rates are determined by the laws of supply and demand, and workers, especially in times of relatively full employment, work for wages which they consider adequate for the work being performed. Employers can’t set wages arbitrarily at any level they choose, any more than they can determine how much they will pay for raw materials (if they could, companies like McDonald’s would be paying the minimum wage, not $8 an hour). Similarly, in a global economy, employers can’t set prices for their products based simply on their cost of labor and materials. Prices are determined by demand. In other words, by and large, higher Social Security taxes on business would have to come out of profits.

The proof of this is the furor that is created among business leaders if anyone even suggests shifting the Social Security tax burden onto them. If they really could just pass the tax increase on to workers in the form of lower wages, they wouldn’t really care about the split.

The other advantage of shifting the tax more onto employers, of course, is that the tax cut for workers would be highly progressive (the Social Security tax itself is highly regressive, hitting the poor the hardest, so reducing it would be highly progressive). In other words, cutting the employee share by 1.5 percent would put an enormous amount of cash into the hands of people who would immediately spend it into the economy, giving the economy a huge boost. (That $30.000 wage earner would gain $450 a year with a 1.5 percent cut in the payroll tax–$50 more than the Bush child care credit rebate which left out 8 million of the lowest income families.)

Why don’t we hear about these facts?

Why is the talk in government and media always about "crisis" and "bankruptcy" when it comes to Social Security?

Well, for one thing, the media is composed of big business entities, and they don’t want to pay those increased taxes.

More importantly, the conservatives ruling in Washington aren’t really interested in saving Social Security. They want to destroy it through privatization.

Meanwhile, liberal politicians are so cowed that they don’t dare offer up any alternatives, though the answers are staring them in the face.

It’s time for progressive politicians to call the conservative Establishment (Republican and DLC Democrat) on this.

Social Security needs real reform, and the way to do it is to raise taxes on the rich and on business.

It’s also time for the media to report honestly on Social Security reform.

Dave Lindorff is the author of Killing Time: an Investigation into the Death Row Case of Mumia Abu-Jamal. A collection of Lindorff’s stories can be found here: http://www.nwuphilly.org/dave.html