Making and Selling a Crisis

Making and Selling a Crisis

Rep. Mike Thompson (D-Napa Valley)

FOR IMMEDIATE RELEASE:

Friday, February 18, 2005

President Bush's plan to privatize Social Security is based on several leaps of faith and more than one breathless attempt to improve the truth. Some of his early critics have equally relied on assumptions and fear to frame their own agendas. It's little wonder why so many Americans are either confused or just plain disappointed over the quality of debate so far.

A national discussion over the future of the greatest social program in the history of the world deserves a better opening act.

A good place to begin would be with the facts. Or as my grandmother used to say, let's start with what we know.

Without Social Security, almost half of today's elderly Americans would be living in poverty. For nearly two-thirds of the elderly, Social Security provides the majority of their income. In our Congressional District alone, 86,000 retired and disabled workers, 11,000 widows and widowers, and 9,000 disabled children depend on a monthly Social Security check that averages about $900.

Social Security is not bankrupt. Nor will it become bankrupt in 25, 50 or 75 years. The president likes to say it is bankrupt because it will begin to pay out more than it collects in 20 years. His definition fails to take into account that Social Security has a $5 trillion surplus trust fund that will guarantee full benefits for another 50 years.

If absolutely nothing is done to change Social Security, benefits will be reduced by roughly 19% beginning around 2052 when the trust fund is exhausted. Under the president's privatization plan, benefits are expected to be cut by roughly 30% in 2052 and by nearly 50% by 2075.

Here's how it works. The president's plan would allow younger workers to divert a percentage of their social security payroll tax into Wall Street accounts. So far so good. Private investment among Americans has dropped over the past several decades ranking us in the basement of developed nations for personal savings. But here is the rub. There is a cost to the president's private accounts beyond the obvious risk.

First, the administration has said that our federal government would have to borrow $2 trillion that we don't have in order to pay Wall Street firms the start-up costs for these accounts. We are already paying $1 billion a day on interest alone to finance our national debt. Forty percent of our debt is currently held by foreign banks. A $2 trillion addition to that debt could increase interest rates for all Americans, including young homebuyers, and further increase our financial vulnerability abroad.

Second, private accounts alone will not support full benefit levels that have been promised to recipients. To ensure there is enough incoming payroll to match benefit levels, the administration has said that Social Security benefits guaranteed under the current system would have to be cut slightly for each dollar diverted to Wall Street accounts. More important, future benefits would be cut for all recipients, whether or not they choose private accounts, by indexing them to the rate of inflation rather than the rate of wage increases.

If ever there was a devil in the detail, this one has big horns. Indexing will cut benefits in half for our grandchildren's generation and effectively end Social Security as we know it.
My grandmother was a first generation American who worked for the Napa Glove Factory and John Daniel's Inglenook Winery. My grandfather was a butcher. They worked hard to provide for our family and were only able to retire because of Social Security. I know they wanted it be around for me as much as I want to ensure it is around for my grandchildren.

There are reasonable ways to shore up Social Security. Creating a phony crisis to destroy it in order to save it isn't one of them. Neither is burying our heads in the sand and pretending that it is meeting the same challenges as it did a generation ago when we made the last improvements.

John Kennedy said the enemy of truth is not often the lie which is deliberate, contrived and dishonest, but rather the myth which is persistent, persuasive and unrealistic. Wall Street investment firms and others are expected to spend upwards of $100 million on television ads to influence the upcoming debate. We owe it to ourselves, our children and our grandchildren to separate myths from facts and distractions from solutions. Social Security deserves an honest, bipartisan discussion, not a sales job.

http://mikethompson.house.gov/newsroom/index.asp?ID=35