Wall Street's Big Plans Promise Social Insecurity
Wall Street's sharpest operators have an incredible offer, just for you. Over the coming decades, they're willing to cut your Social Security benefits gradually to zero; raise your taxes by hundreds of millions of dollars; charge exorbitant management fees while they gamble your retirement savings, with the possibility that you will live out your declining years in destitution. Doesn't sound so good? Unless Congress enacts real campaign finance reform very soon, it may be an offer you never get a chance to refuse.Conservative politicians, who often give lip service to "saving" Social Security, have mostly wanted to wreck it from the beginning. The current crescendo of buzzwords like "crisis" and "privatization" is the culmination of a long campaign to discredit the most successful government program in American history.Since the early 1980's, this crusade has been spearheaded by investment banker Peter Peterson, a former Nixon Administration official who has written many articles and a couple of books seeking to advance the idea that "middle-class entitlements" are slowly bankrupting the country, and that the promised benefits of Social Security will be depleted by the time today's young workers are ready to retire. The sincere exertions of Mr. Peterson and like-minded analysts have had the desired effect; their gloomy exaggerations are now accepted as conventional wisdom by editorialists and pundits everywhere.Incessant publicity about the alleged crisis has created the opening for a "solution" that Mr. Peterson did not intend--namely, privatization of the public retirement system that has lifted the nation's elderly out of poverty. With many Americans convinced that the system is headed for insolvency some time early in the next century, major financial interests are concocting an unwholesome remedy for the system's supposed illness. They want to divert hundreds of billions in Social Security revenues into mandatory retirement accounts managed by their firms--along with lavish fees, of course.Yet, as the current dispute among members of the President's Advisory Council on Social Security has revealed, there is considerable disagreement about whether any crisis actually exists, let alone what the solutions ought to be. Everyone agrees that the system will remain in surplus--as it is now, bringing down the Federal deficit--until at least 2029. Then what?Federal law requires that the Social Security trust funds be structured so that income and outflow balance for 75 years into the projected future. According to former Social Security commissioner Robert Ball, who serves on the President's panel, that could be guaranteed by technical adjustments such as a gradual increase in the retirement age, taxing benefits that exceed what the beneficiaries paid in and including Government workers now covered by separate pension plans. Another possible fix would be an almost imperceptible increase in Social Security taxes. Mr. Ball also has suggested a more innovative plan that was taboo when the system was created: the investment of some revenues in stocks and corporate bonds rather than solely in U.S. Treasury notes. Though more risky than the present investment scheme, this strategic change would allow the trust funds to grow faster.In other words, there are several options more sound and less perilous than privatization, which would encourage younger, richer employees to opt out of the system and eventually dissolve it altogether. The problem with the saner alternatives, from Wall Street's perspective, is that none of them promise the fat fees guaranteed by diverting Social Security's revenue stream into their grasping hands. That's why they are now spending millions on "research" by conservative think tanks aimed at promoting privatization.The downside of privatization will only become obvious when the market finally tanks, after a speculative boom fueled by new money. (In the meantime, we will be socked with huge new taxes to finance the transition.) But by then, the promoters will have taken the money and run.If that sounds like paranoia, consider what happened the last time we bought into a Wall Street dream scheme. When President Reagan signed a bill deregulating the savings and loan industry, a rip-off rammed through Congress by investment banking campaign contributions, the ever-optimistic actor said, "[W]e've hit the jackpot." Billions of bailout dollars later, we must look like suckers to these people.But even if most Americans are sufficiently savvy to question the false panacea of privatization, this swindle could be imposed on them, anyway. Financial PAC donations already dominate Washington, and will swell further in the effort to carve up Social Security. That is why the stakes in campaign finance reform are so great. Unless constrained by reform, the same gang that made out like bandits in the S&L scandal can legally purchase enough votes to transform Social Security into a national casino run by them--an establishment where they, like the house in Vegas, will be the only sure winners.