The Latest Billionaire Ploy to Destroy Social Security
America's very rich keep trying to start a movement among college students to blame senior citizens for the sorry state of the economy that kids will inherit. Specifically, the billionaires keep trying to scapegoat Social Security.
This is part of the public relations effort to create a "grand bargain" to cut America's (fast-declining) budget deficit. The Peter G. Peterson Foundation has spent about a billion dollars of Peterson's own money to create faux movements to get students to take up this unlikely cause.
The latest of the billionaires to try this gambit is Stanley Druckenmiller, net worth estimated at $2.9 billion, former head of the hedge fund Duquesne Capital. Druckenmiller's personal campus crusade has been the subject of two fawning profiles, one by Tom Friedman in Wednesday's Times, the other by James Freeman in Saturday's Wall Street Journal.
Druckenmiller's campus crusade is based on such preposterous economics that I hereby challenge him to a college debate or series of debates. Freeman's puff piece in the Journalbegins thus:
Stan Druckenmiller makes an unlikely class warrior. He's a member of the 1% -- make that the 0.001% -- one of the most successful money managers of all time, and 60 years old to boot. But lately he has been touring college campuses promoting a message of income redistribution you don't hear out of Washington. It's how federal entitlements like Medicare and Social Security are letting Mr. Druckenmiller's generation rip off all those doting Barack Obama voters in Generation X, Y and Z.
"I have been shocked at the reception. I had planned to only visit Bowdoin, " his alma mater in Maine, he says. But he has since been invited to multiple campuses, and even the kids at Stanford and Berkeley have welcomed his theme of generational theft.
After we baby boomers get done retiring -- at a rate of 7,000 to 11,000 a day -- if current taxes and entitlement promises are not reformed, the cupboard will be largely bare for today's Facebook generation. But what are the chances of them getting out of Facebook and into their parents' faces -- and demanding not only that the wealthy do their part but that the next generation as a whole leaves something for this one? Too bad young people aren't paying attention. Or are they?
Wait! Who is that speaking to crowds of students at Berkeley, Stanford, Brown, U.S.C., Bowdoin, Notre Dame and N.Y.U. -- urging these "future seniors" to start a movement to protect their interests? That's Stan Druckenmiller, the legendary investor...
Where to start? If you itemize all the reasons why recent college graduates face a wretched economy, Social Security doesn't even make the list. What does make the list are unreliable jobs that pay lousy wages, the aftereffects of a financial bubble created on Wall Street, and unaffordable college that leaves graduates starting life with more than a trillion dollars worth of debt.
The next generation, and the one after that, will have a shot at a decent life if we can get growth and a fairer distribution of earnings back on track. That project has nothing whatever to do with Social Security or the federal deficit. On the contrary, if we keep on the austerity kick and further cut social outlays that promote opportunities, growth will be even slower.
The biggest lie in Druckenmiller's crusade is the premise that the income distribution problem is somehow generational and that he, as a billionaire, has anything whatever in common with most college students or most recipients of Social Security. One of his pitches to students is that Social Security is excessive because he, a very wealthy man, receives it but doesn't need it.
But for the vast majority of the elderly, Social Security is a lifeline, and a meager one at that. Some two-thirds of all seniors depend on Social Security for half of their income. Fully 46 percent of elderly widows and other unmarried seniors depend on Social Security for at least 90 percent of their income.
The entire projected 75-year shortfall in the Social Security trust funds that conservatives make such a big deal about is around one percent of GDP per year. We could make it up with modest tax increases on wealthy people like Druckenmiller.
Since Social Security is financed by payroll taxes -- on wage and salary income -- the real Social Security crisis is the crisis of stagnant wages. If average wages had continued to track average productivity growth during the past three decades, as they did in the three decades after World War II, Social Security would be in perpetual surplus.
The real crisis facing the elderly is not that Social Security is excessive but that it's inadequate -- especially with the collapse of traditional pensions in favor of far less reliable 401k plans (another counter-revolution made on Wall Street.)
There is a certain moral blindness and chutzpah of very wealthy people trying to enlist students in a generational movement against the alleged affluence of their grandparents. The real issue here is not generation, but class, specifically Druckenmiller's class.
Contrary to the claim in writer Freeman's opening sentence -- that Druckenmiller makes "an unlikely class warrior," his crusade is precisely class war, of the sort we have been seeing for decades -- of the very wealthy against everyone else.
Happily, most of America's students don't seem to be taking the bait. None of Pete Peterson's front groups has had much resonance on campus -- not his "Fiscal Wake-Up Tour," nor "Fix the Debt," nor more far-fetched groups aimed a college students such as "America's Promise Alliance," nor the foundation's poetry contest aimed at battling deficits in verse.
However, these crusades do have a certain resonance among media elites and even in the Obama White House. As we go into the next phase of a trumped up budget crisis, with Social Security and Medicare as targets A and B, the politics and economics could not be more perverse.
So how about it Mr. Druckenmiller? If you are so sure of the righteousness of your cause, how about defending yourself in a campus debate?
Robert Kuttner's new book is Debtors' Prison: The Politics of Austerity Versus Possibility. He is co-editor of The American Prospect and a senior Fellow at Demos.
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