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The Democratic Plot to Privatize Social Security

Looks like I picked the wrong week to quit drinking.

-Steve McCroskey, AIRPLANE (1980)

I have shared this sentiment on a daily basis during this absolutely absurd electoral circus year, particularly when engaging with lesser-evil Clinton boosters who seem to have come upon the finest batch of hallucinogenic mushrooms this side of the Rio Grande. These people, many of whom are pleading for a Clinton vote on the basis of the idea that a President Trump would ravage what remains of the social safety net, are simply refusing to accept or alternatively do no believe that the Democrats are aiming to privatize Social Security right now and have been for years.

Those who doubt this should do themselves a favor and examine the record. First, read through the excellent Counterpunch essay by historian Robin Blackburn, How Monica Lewinsky Saved Social Security, which explains how the neoliberal Democratic Party agenda regarding Social Security started to be rolled out by Bill Clinton when his intern forced him to pivot to the left in order to shore up his base as a defensive posture against the inquiries of Ken Starr.

This has been an agenda item for decades that can be traced back to the minds of the fiscal brain trust of Larry Summers and Robert Rubin. Both men have played major roles in Obama’s political career dating back to his early days as a “community organizer”, which was in fact a gentrification project done on behalf of the Chicago FIRE (finance, insurance, and real estate) sector. When Clinton was administering Rubin/Summers policies to benefit the FIRE sector, Obama was working on the ground in the Windy City as a foot soldier for this agenda.

Perhaps those who remain hesitant might benefit from a point made by “Robert Fitch, a brilliant and prolific radical journalist and troublemaker”, to quote his friend Doug Henwood. Fitch delivered an important speech to the Harlem Tenants Association in November 2008: “[One] co-chair [of the Obama 2008 White House Transition team] is William Daley, the Mayor’s brother and the Midwest chair of JP Morgan Chase—an institution deeply involved in the transformation of inner-city neighborhoods thorough its support for—what financial institutions call “neighborhood revitalization” and neighborhood activists call gentrification.”

Fitch said in that speech:

If we examine more carefully the interests that Obama represents; if we look at his core financial supporters; as well as his inmost circle of advisors, we’ll see that they represent the primary activists in the demolition movement and the primary real estate beneficiaries of this transformation of public housing projects into condos and townhouses: the profitable creep of the Central Business District and elite residential neighborhoods southward; and the shifting of the pile of human misery about three miles further into the South Side and the south suburbs. Obama’s political base comes primarily from Chicago FIRE…

Fitch was far more ahead of the curve than most Americans. The majority of the public was deluded by both a clever advertising campaign on the part of the Democratic Party in 2007-08 as well as a complimentary demonization campaign of Obama by the Republicans and their proxies in the conservative media.

Yet despite right wing fever dreams of the Senator from Illinois as everything from a Marxist to Islamist, he in fact has always been a deeply conservative thinker who has referred again and again to the Reagan presidency with approving tones, epitomized when he said “I do think that, for example, the 1980 election was different. I think Ronald Reagan changed the trajectory of America in a way that, you know, Richard Nixon did not and in a way that Bill Clinton did not. He put us on a fundamentally different path because the country was ready for it.” These near-Freudian slips reveal how the Democratic Party embraced the classical agenda items of the Rockefeller Republicans.

Next, consider carefully the tenure of our first African American president, who the average taxpayer would think should know better due to how important SSI and SSDI are to poor black and brown people who have no other retirement savings.

First, there was the dubious report offered by the Bowles-Simpson commission, which “proposed major cuts to Social Security, including an increase in the retirement age, a lower benefit formula for above-median earners and a stingier cost-of-living adjustment” with “69 percent of the commission’s proposed budget savings came from spending cuts”, to quote a column by Daniel Marans, Arthur Delaney, and Ryan Grim.

Then of course was Obama’s offering of Social Security cuts as part of the so-called “Grand Bargain” with the intransigent Republicans. Many will argue that Obama was not at fault because the Tea Party hindered his efforts substantially. But Fitch pointed out that Obama’s ideology, known as the Third Way, was significantly different from both the traditional Left and Right:

In a way, though, the Left and the Right have more in common with each other than they do with the advocates of the Third Way. The Left and the Right argue that different interests matter. The Third Way says they don’t. According to them, the oppressed and the oppressors, the lions and the lambs should set down together and celebrate their unity in one great post-partisan, multi-cultural 4th of July picnic. …Obama’s notion of change claims to transcend the politics of interest while it steers sharply to the right.

A hallmark of the Third Way ideology is using the political opposition to push the political discourse to the right, the actual trajectory that was always intended by a faux-left presidency. Bill Clinton did it masterfully in tandem with Newt Gingrich, who he could easily have crippled by pointing out the close relationship between the GOP and the elements of the militia movement that had blown up the federal building in Oklahoma City, and Obama followed suite with an insurgent astro-turfed populist opposition caucus brimming with racism, sexism, homophobia, and xenophobia. This is a hallmark of triangulation wherein the Democrats take up the Republican fiscal policy positions while maintaining a patina of liberalism through invocation of identity politics. The privatizing of Social Security is one such triangulation.

This was followed by Obama appointing Charles P. Blahous III to a second terms as as public trustee of Social Security. Blahous was a major player in the George W. Bush administration’s efforts to privatize that failed purely because they were too clumsy with the effort. His reconfirmation vote was 14-12, all Democrats voting against him, and featured notable quotes wherein Sen. Elizabeth Warren called him “an anti-government zealot” and Chuck Schumer said he was “personally ideologically opposed to the fundamental promise of Social Security.” Journalist Michael Hiltzik wrote for the Los Angeles Times a column titled Has President Obama appointed a fox to guard the Social Security henhouse? that is an informative read.

Fitch identified Obama in his speech as a communitarian, a philosophy that “flows from belief that we all share a common good. What’s needed to achieve the common good, communitarians insist, is sacrifice.” But, like his fellow communitarian Bill Cosby, the path needs to be first tread by poor black and brown people, who “have to show the way in giving up their selfish, anti-communitarian habits.” This carries a trace of tragic irony because, as anyone who has ever spent any time in the black and brown community knows, these urban communities are models of organization, horizontally-integrated networks of mutually-beneficial groups that work together to better the whole. Indeed, the Harlem Tenants Association that Fitch delivered his speech to is a perfect example of this! Communitarian philosophy therefore should be seen like neoliberalism as a deeply conservative ideology that utilizes the grammar of liberation for opposite intentions.

Now Obama is moving towards privatization through manipulation of the Consumer Price Index that is used to determine monthly payments and yearly cost-of-living adjustments (COLAs) and at one point did seem to support raising the retirement age, though agitation made him pivot to the left. By manipulating the chained CPI, a bipartisan consensus will propose that this proves government-administered Social Security does not work. Paul Craig Roberts writes:

The first falsification of the CPI was the work of the Boskin Commission during the Clinton administration. The Boskin Commission destroyed the CPI as a measure of the cost of a constant standard of living by introducing “substitution.” To keep it simple and brief, if a price of an item in the weighted basket of goods used to compute inflation rises, a lower priced item is substituted for it. The effect, and most likely the intention, of “substitution” was to make more money available for non-entitlement programs by reducing cost-of-living adjustments for Social Security. Payroll tax revenues are lumped together with other tax revenues, and the government funds itself from the total… The ideological attack on entitlements is again underway. Wall Street is funding it and egging it on. Wall Street is looking forward to fees that will eat up all gains and in these days of negative interest rates eat up capital as well.

This will create a feeding frenzy for Wall Street in the form of service fees on the individual accounts. And due to deregulation and the too big too fail paradigm, it is almost for certain that the Wall Street casino will gamble away this capital on absurd investments that define our bubble economy.

Ironically, the antithesis of this is the fact that Social Security can be a major engine to help pull the economy out of a recession. Economist Dean Baker at the Center for Economic and Policy Research explained to me in an interview that the continued sluggish nature of the economy is related to demand. “Our big problem is not enough demand in the economy. So we need things that will create demand. That’s what’s restraining the economy, if we had more demand we would have more growth and more employment.” That means that a monthly Social Security payment protects and can even increase the consumption of beneficiaries. “That’s income they count on and they’re able to maintain their standard of living, maintain their consumption level,” Baker says. “By insuring that they have a steady flow of income, you’re protecting their consumption, which is exactly what you want to do in a recession. You don’t want them to have to cut back their consumption both because, obviously, it’s bad for them, most of them aren’t living so well that they can just cut back their consumption by a large amount, but it’s bad for the economy, you want them to sustain their consumption.”

In an interview last year with Eric Draitser on CounterPunch Radio, economist Michael Hudson, who was responsible for publicizing the Fitch speech, described in detail how Obama’s election fundamentally changed the Democratic Party. “They appointed the anti-labor Rahm [Emmanuel]…to essentially drive any Democrat to the left of Herbert Hoover out of the party and has essentially made the Democrats to the right of the Republicans. So now you have people like Donald Trump saying he’s for what Kucinich was for, he’s for a single-payer healthcare program… Obama’s genius is being able to make people believe that he’s on their side when he’s actually defending his Wall Street special interests!”

By contrast, the National Committee to Preserve Social Security and Medicare wrote:

“Incredibly, most people still don’t realize that workers who earn more than $110,100 don’t contribute on their full income and that simply removing that tax loophole for high earners would close the vast majority of Social Security’s modest long-term funding gap… Making the wealthiest Americans pay the same payroll tax already assessed on those with lower incomes should be a no-brainer and it is the solution Americans prefer rather than cutting already modest Social Security benefits.”

Fitch’s speech revealed the true modus operandi of Obama.

“What emerges is a constellation of interests around Obama that I call “Friendly FIRE.” FIREpower disguised by the camouflage of community uplift; augmented by the authority of academia; greased by billions in foundation grants; and wired to conventional FIRE by the terms of the Community Reinvestment Act of 1995… Friendly FIRE wants the same kind of education reform as FIRE: the forces that brought about welfare reform have now moved onto education reform and for the same reason: crippling the power of the union will reduce teachers’ salaries, which will cut real estate taxes which will raise land values.”

This underscores the ultimate goal of the FIRE sector. Using the academic discourse of neoclassical economics, which itself is an imperial project, and a vanguard of neoliberal and neoconservative policymakers, this group intends to buy up the entirety of land in the country and become entrenched as a new financial aristocracy lording over a neo-feudal population of serfs.

This totally goes against the principles that underwrote the Enlightenment and later the revolutionary epoch in America known as the Civil War and Reconstruction, both of which were attempts to abolish feudalism and replace it with a capitalist order. Since the end of the Nixon presidency, the FIRE sector has been working in tandem with policymakers to reign in what the Trilateral Commission called “the crisis of democracy”, those gains that were made in the period between the start of the New Deal and the end of the Vietnam War due to popular agitation and protest movements against war, various forms of chauvinism, ecological degradation, and poverty. This is accomplished through the weapon of debt and various fees or fines that are actually a form of rent paid to the FIRE sector. Social Security is one of the biggest impediments to the creation of the neo-feudal economy.

The political landscape is problematic in this election. The Libertarians are at least honest about wanting to privatize Social Security. Donald Trump has said at various times he wants to knock out systemic flaws while preserving the Social Security while standing on a Republican platform loaded with not much more than slogans that suggest a desire to privatize. A President Trump would need to oversee a massive purge of the diplomatic, defense, and financial policy corps to oust the neoclassicals eyeing both Social Security and war with Russia, which is itself not impossible given grassroots disdain for the neocon establishment. Only Jill Stein in the Green Party has a clear stance with a party that supports preserving Social Security.

The real free radical in this election is Hillary Clinton, who on the one hand has a base opposed to privatization and a fiscal brain trust in favor of it. The only augury of what might happen is the intransigence of Clinton proxies in the Democratic platform sessions this summer. If they were that intransigent about a worthless platform, how attentive will they be to a base they guilt-trip into voting for them using neoliberal identity politics?

More articles by:

Andrew Stewart is a documentary film maker and reporter who lives outside Providence.  His film, AARON BRIGGS AND THE HMS GASPEE, about the historical role of Brown University in the slave trade, is available for purchase on Amazon Instant Video or on DVD.

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