Social Security shakedown

Don't believe the Democrats: The current system fleeces blacks and working people while helping the rich. The Bush plan will change that.

Published August 7, 2001 12:36AM (EDT)

With the release of the report of the Commission to Strengthen Social Security, which President Bush created to guide his reforms, the class war has heated up. Reading the Web sites of Bush's opponents takes a geezer like myself back to the days when Stalinism was the fashion in progressive circles and the Daily Worker featured fat capitalists in silk top hats with "Wall Street" and dollar signs emblazoned on their tuxedo bibs.

"Big Wall Street fans of privatization stand to make $240 billion over the next 12 years if Social Security is replaced by privatized individual investment accounts," warns the AFL-CIO's Web site in a "Social Security quiz" rigged to show that giving citizens ownership of their own money is a scary venture designed to line the pockets of the ruling class. Since the federal government, municipalities of all sizes and all government programs favored by the left also make money for the Wall Street tycoons who finance government debt, the AFL-CIO position -- if consistently argued -- would lead to the conclusion that government itself is a bad thing and should be opposed. In fact, what the AFL-CIO socialists really want is to eliminate the system of private enterprise and have the state finance, and politicians control, everything in sight.

The Democratic National Committee is not really very different from these union socialists. Labor finances Democratic Party operations, shapes its campaigns and supplies the lion's share of its activists and ideas. Not surprisingly, the DNC has an identical view of the Social Security issue: "The Wall Street crowd, which was generous in its financial support to the Bush campaign, likes this plan." Ergo, it's bad. But one would have to be brain-dead (or have slept through all those Clinton-Gore fundraisers) to not realize that Wall Street is not a one-party slush fund.

Those of us who are not saddled with the burdens of Marxist purity understand that this is how things should work in a capitalist world. Small "d" democrats prefer a system in which Wall Street plays a significant role because this setup has provided more wealth to more people -- to more formerly poor people -- than any other system in the history of mankind. It is private corporations that made the liberation of the working poor possible. Only religious fanatics of the Seattle-Genoa sect will deny it.

One of those fanatics -- Gerald McEntee, president of a government bureaucrats union (AFSCME) -- declared that the Bush reform plan was "Welfare for Wall Street." The leftist McEntee was a key fundraiser and strategist for Al Gore in the last election. That the Democratic Party is dependent on Neanderthals like McEntee illustrates its problem. Even though it feeds sumptuously off the capitalist teat, at election time it is still a prisoner of the socialist mind-set. Guided by the reactionary prejudices of the left, it acts in power as a mighty brake on social progress and social reform. If this is too counterintuitive for the average Salon reader, think of the Democrats' 20-year war against Republican reformers over welfare. Theirs was a futile effort to defend an indefensible system that did more damage to the inner-city poor, and to minority poor in particular, than any system has done to any group since the abolition of slavery.

Likewise, our current Social Security system hurts the minority poor and working class disproportionately. To understand the destructiveness of the Democrats' agenda, it is necessary first to clear away the ideological fog they have created to smother the Bush reform. The commission overseeing the reform is, in fact, not a Wall Street-Republican cabal but a bipartisan group cochaired by former Democratic Sen. Pat Moynihan. The practical proposal to reserve 2 percent of individual retirement plans for private accounts is already a practice in Social Democratic Sweden. These facts, of course, aren't enough to dissuade ideological storm troopers like the editors of the Nation from denouncing the plan as a "Social Security heist" for the rich. But others should be more open-minded.

The idea behind the Bush proposal is to give working people control over their financial futures. Contrary to the Democrats' claims, this is not "welfare for the rich" but just the opposite: opportunity for the working classes. Rich people already have control over their financial futures through private plans that pay double -- and more than double -- what the Social Security system now offers. Unlike those who depend on Social Security, the rich get to control their retirement funds as personal assets and, therefore, to pass them on to their children. Bush's idea is really quite revolutionary: Let's give the working class the same privilege and power over their retirement funds that the "ruling class" has over its.

Fortunately, almost half the population is now invested in the market and thus financially sophisticated enough to understand this. A five-year certificate of deposit at your local savings bank will earn you 5 percent per year -- twice as much as your present Social Security account. All "privatization" means is that you control the money you put in your savings plan. Under the Bush reform, you could choose to put your Social Security funds in a savings account. If the entire account were privatized, instead of just 2 percent of it, you'd be twice as well off when you retired as under the present scheme.

The Bush reform plan is better than even this suggests, because it would allow you to pass the money your account accumulated to your children and loved ones when you died. In one or two generations every working family could acquire the capital to become capitalists. What happens now, instead? The government keeps the money.

Having put the picture back in order, we can see what a colossal rip-off the present Social Security scheme actually is, especially for working people. Remember, if you're wealthy, the payroll tax that underwrites the scheme is only an annoyance. For the rich, it's not 12.4 percent of income as it is for workers, since there's a cutoff in the tax after you've earned $80,000. On the other hand, if you're wealthy, you're not even going to notice your Social Security check when it comes because you have far better options for creating your retirement nest egg -- like investing in the market and making a conservative 8 percent (or four times the Social Security return) for your efforts.

But if you don't have these options -- if you're a working person of modest means -- the Democrats' plan ensures that you are going to get royally screwed, and not just because the present system is heading for a cash crisis, which will eventually cost you 18 percent of your paycheck (instead of the present 12.4 percent).

If you make $34,000 a year and happen to die at 67, under the present Social Security system, you will have lost $156,000 over your lifetime. That's because you got only $30,000 of the $186,000 that was taken out of your paycheck before you kicked the bucket. In other words, you didn't live long enough to make even the 2 percent return that Social Security promises -- let alone the 5 percent you would have earned if Republicans had been allowed to give you a private Social Security savings account. Because the program is already in trouble, the Social Security retirement age under the current system is being raised to 67, so that you wouldn't even get the $30,000.

If you think 67 is a young age, consider this: It is the average age at which African-American males die. Under the present Social Security system, the government takes 12.4 percent of the wages every black man earns, knowing that on average it will never pay him back a dime. Nor will he be able to pass any of the money he earned and saved to his children, as he would be able to do under the Bush reform plan. The government will get it all.

Terence Jeffrey, editor of Human Events magazine, laid this out brilliantly in his March 12 issue. He fleshed out the Social Security reality for black workers by imagining a man named "Bob" who was born in South Carolina in 1940, graduated from segregated schools in the 1950s, served in Vietnam in the '60s and got married and had two children in the '70s. In 1998, Bob's wife died of breast cancer, and two years later he died of a heart attack.

For 40 years the government had taken a healthy chunk out of Bob's pay before he could deposit it in the bank. Under government rules Bob's employer was only required to tell him, however, that it took half of what it actually did take. By the mid-1980s, the chunk was 12.4 percent, but on Bob's paycheck only 6.2 percent was noted. The Democratic framers of Social Security planned it this way to keep Bob from knowing what they were doing to him.

"Where did Bob's Social Security taxes go in those years?" asks Jeffrey. "A good portion went to pay the current benefits of retired people. But 'surplus' Social Security tax revenue -- money that came in over and above what was needed to pay current benefits -- was squandered by the members of a Democratic majority Congress to fund increased government spending for the purpose of enhancing their own power, prestige and political invulnerability."

Among the projects the Democrats may have spent Bob's money on were Andrew Serrano's "Piss Christ," a congressional pay raise and a bailout of reckless New York bankers who invested in Mexican government bonds. "One place it didn't go was back to Bob, who wasn't a congressman, didn't patronize blasphemy, and was too shrewd to invest in the government of Mexico," Jeffrey writes. It also didn't go to Bob's children, as it would under Bush's plan. Bob had paid the government more than $100,000 over his lifetime, possibly more than $200,000. This was more money than he had ever seen at one time while he lived. If Social Security were fully privatized, the money taxed for Bob's savings would go to his two children. Under the present system, it is just gone -- or rather it is gone to the congressional spenders. Bob's case is typical for one-third of all black men. They pay all their lives and die before they collect a dime. Under the Democrats' Social Security system they lose what for them would be a fortune, and get back exactly nothing.

What about the part of Bob's paycheck that went to provide benefits to current retirees? Here is Jeffrey's hypothetical example: "While Bob, at 60, was paying 12.4% of the last paycheck he earned to subsidize Social Security, a retired 70-year-old Lexus-driving white lawyer across town, who used to charge his clients $200 an hour and who has a stock portfolio worth $5 million, was receiving regular Social Security checks subsidized by Bob's current payroll taxes. The retired lawyer's habit was to pick up his checks at the Post Office on the way to the country club."

I have quoted Jeffrey's example to show how topsy-turvy our political categories are these days. Democrats are defending a reactionary scheme that systematically robs black males and working people, bars them from the one chance they have to accumulate capital and steals 10 percent of their hard-earned income over the course of their working life. Republicans are proposing a progressive plan to end this injustice, put power into the hands of working people and return their hard-earned money to them. Will they succeed? Only if the American people keep their heads clear of the ideological fog machine.

By David Horowitz

David Horowitz is a conservative writer and activist.

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