Theron  Aiken

25 January2005

Congress Lacks Vision on Social Security Reform

            George Bush believes he has a mandate--political capital, he calls it—to institute those principles on which he ran his campaign. Among those is an overhaul of Social Security. Bush’s plan involves privatizing the  Social Security Trust Fund. But what has happened to the Trust Fund that it requires overhauling. Well, for the past 40 years the government has been “raiding” the fund to the point that by 2025 outflow from the fund will exceed monies coming into the fund and by 2037 (some may argue the exact dates, but the principle is the same) the fund will be completely empty. In effect, Bush is saying, “We’ve spent the money that you entrusted to us, and now you’re on your own.” This is one of the most heinous of crimes in the continuing debacle called the Bush presidency.

            Economic Security, as it was originally called, was instituted originally with the best of intentions by a president, Franklin Delano Roosevelt, who had nothing to gain politically from promoting this legislation. In fact, it was an uphill battle for FDR to get this legislation passed, and it passed right before FDR ran for reelection in 1936. In other words, FDR was a president who was concerned with long-term responsibility rather than short-term popularity. But he won reelection by the largest electoral victory ever. While the Social Security Act was never as strong as FDR envisioned it, it was probably as strong as it could be given the political climate of the time. The most important aspect of the legislation, though, was the idea that this fund was a trust established between the people and their government: a trust that would later be broken by that government.

            It is important to understand that there is no money in this fund. Instead, the money we pay into social security is then shifted into Treasury Bills and, in effect, replaced by IOU’s. Does the government pay interest on the money that they take out of the Social Security Fund? Well, yes and no; they pay interest, but they pay it with more IOU’s. Now the irony of this method of funding is that the real money, our money, that we put into the fund is no longer there and what is there is a government obligation for which we as taxpayers are responsible. Not only could we lose what we invested, but we could be responsible for that same amount plus interest if the government were to fold. Of course that is unlikely but it serves to demonstrate the absurdity of this method of doing business. Insurance companies and investment firms have to be fully funded, but the U. S. Government does not. Furthermore, once our money is swept into the general fund, it can be used to pay for anything the government wants. The war in Iraq, the war on terror, the war on drugs or whatever other war is being waged at the time is all fair game for our Social Security monies. More important than the capricious use of our money, though, is the basic breaking of the trust under which we agreed to pay into this fund. As for the writer, he has been paying into the fund for 42 years with the belief that this money was being set aside and conservatively invested so that it would be there for him upon retirement. He wouldn’t call investment in securities of a government that practices deficit spending, lacks a positive trade balance in the world, has a devalued currency and wages irresponsible wars a conservative and prudent investment.

            It is not necessary to privatize Social Security; but it definitely needs revamping. First of all, and most importantly, the government must operate with a surplus equal to the money that it takes from the fund plus interest. As long as we have a deficit, the government has betrayed every citizen by not securing the funds that each of us has paid into the fund. Secondly, a portion of the fund could be invested in conservative equities that would bring about a better return than government securities. Finally, we must elect representatives who, like FDR, are more interested in long-term security rather than short-term popularity. Right now, those congressmen favoring privatization are like rats deserting a sinking ship. They show no vision, no leadership and no sense of duty to fulfilling the trust that was set up in 1935.