The coming Social Security fight: Why large private foundations are undemocratic

[Hannah Bell]

The powers that be are getting ready to destroy Social Security in the name of saving it. Several large, private, supposedly 'liberal' foundations are helping with the effort.

William Grieder reports:

"The ugliest ploy in their campaign is the effort to provoke conflict between the generations.
'The automatic funding of Social Security, Medicare and Medicaid impedes explicit consideration of competing priorities and threatens to squeeze out spending for young people,' these economists declared.

Children, it is suggested, are being shortchanged by their grandparents. This line of argument has attracted financial support from some leading foundations usually associated with liberal social concerns--Annie E. Casey, Charles Stewart Mott, William and Flora Hewlett. Peterson has teamed up with the Pew Trust and has also created front groups of 'concerned youth.'"

http://www.thenation.com/doc/20090302/greider/2


Splitting support for Social Security by dividing the generations was a tactic laid out in the influential 1983 Cato Institute paper "Achieving a 'Leninist' Strategy":

"Before Social Security can be reformed, we must begin to divide this coalition
and cast doubt on the picture of reality it presents to the general public....

...Interest groups concerned with Social Security reform can be divided
into the young, the middle-aged working population, and the retired
or those nearing retirement. Of these, the young are the most obvious
constituency for reform and a natural ally for the private alternative.

...Discontentment will only grow as the taxes needed to support the system
continue to rise, and as the prospects for a reasonable return on one’s
'contribution' continue to fade."

http://www.cato.org/pubs/journal/cj3n2/cj3n2-11.pdf


Make no mistake: this was not an academic paper. The tactical recommendations in it have been put into place, starting with the expansion of IRAs & other potential SS substitutes (401Ks, anyone?).

The groundwork for generational conflict has been laid. Most young people will tell you they don't believe SS will be there for them (thanks to having the idea drummed into them via media.) SS tax rates of 6.2% - about 1% in excess of current payout requirements for the last 25 years - & poor career prospects for recent cohorts also fuel dissatisfaction & willingness to buy into alternatives.

Lenin, the authors of the 1983 paper conclude, advocated stealthily laying the groundwork & support for the change you desire, so that when a crisis point emerged, you'd be ready to move in to take advantage of it:

"The next Social Security crisis may be further away than many people believe.
...it could be many years before the conditions are such that a radical reform of Social
Security is possible. But then, as Lenin well knew, to be a successful
revolutionary, one must also be patient and consistently plan for real
reform."


The latest crisis point is upon us, & not surprisingly, despite the meltdown of pensions, 401Ks & jobs, the Social Security vultures are on the case. Conservative foundations have funded the anti-Social Security meme for a long time, but the entry of supposedly liberal foundations into this area is something relatively new, & signals the support of liberal elites for scaling back Social Security.

That they choose to enter the fray by pitting the young against the old demonstrates the fraud of their supposed "liberalism". This is the most despicable form of atomizing, solidarity-destroying class warfare; dividing generations, family & neighborly bonds.

I've posted a few times on the less-than-laudable activities (genetically modified food & charter schools, anyone?) of a foundation that shall be nameless. Inevitably followed by a boatload of comments like: "But they're nice folks hel-ping the pooooooor!"

No. They're rich folks pursuing their own goals. Private foundations are tax-free accumulations of capital, used by the super-rich to steer public opinion & public policy & to 'gift' their political lapdogs with jobs & pork.

Why does Bill Gates get to make agricultural policy for Africa? Who are the officers of the Pew Charitable Trusts, & why do they get to fill the public arena with blather about the old thieving from the young?

Foundations are UNACCOUNTABLE, NON-DEMOCRATIC accumulations of private, ruling class power. They don't act in ordinary people's interest except at the margins.

If the last year's parade of theft & deceit hasn't convinced you that the ruling class agenda for the average worker is to empty his pockets, & for the already poor to destroy them totally, you haven't been paying attention.

I hope you'll join me in writing & calling your representatives until they shut up about Social Security & ADDRESS THE REAL PROBLEMS:

*No changes to Social Security. It's not in crisis; the economy is.

*Rescind Bush's tax cuts & raise income & cap gains on the top 1-5%.

*Real jobs making real stuff: stop giving tax breaks for offshoring & overseas hiring.

*Wages, housing, & universal healthcare.


There is no economic conflict between the generations.

But there's a big economic conflict between the global ruling class & everyone else.

[safeinOhio]

1. IRAs and 401s?

If that is all they can come up with, SS will be safe for now. The young will favor taxing their rich parents, rather than the Stock Market.

[Hannah Bell]

2. they have other ideas, no worries.

[exboyfil]

6. You are right about these multigenerational foundations

skewing the debate. I keep hearing about all the money the rich give away to charity (Buffett and Gates being recent examples), but all they do is to create entities that survive them with their fortunes intact. The most interesting ones are those in which their descendants get salaries to call the shots in how these charities spend their money. Good work if you can get it.

As far as S.S. goes, unless we find a way to amp up the wages (real growth and not just inflation)or increase the number of folks paying in (integrate a large country of young people like Mexico who don't mind funding our retirements), we are going to face choices in the future (ie a reduction in benefits and/or an increase in the marginal rate). I think a no brainer is applying the rate to all wage income in the U.S. (no max cap so long as that additional income gets to participate at the 15% rate like those between $50K-$100K). It is illogical to ladder down the participation rate and then cap it. The same argument for those making $50-$100K subsidizing S.S. can be made for those above that level. You are someone else proposed also taxing investment income like earned income, and that has a suggestion with some merit, but you will have to balance it with the potential for capital flight. That also brings the question of what makes a taxable event (interest, capital appreciation per year or when a sale occcurs, or death??).

We both agree from earlier posts that a "Trust Fund" can't exist in the environment of deficit spending. While it looks good on paper (the $2.2T in the "lock box") we both know it holds the same paper as the Chinese with the U.S. looking to borrow more of it to send to places like AIG (we are out of our minds). I don't know how you handle multigenerational transfer of pension obligations though (public ownership of private entities - I guess we are already doing that now with AIG, Citibank etc but real poorly).

Actually I think, except for raising the cap to infinity on wages, we should spend our time working on Universal Health Care/nationalization of health insurance. We will need to find the dollars to plug the Medicaid hole, and they are only available through greater efficiencies in the dollars we spend (we should get to 16% of income on health care like the Germans and not the 24% currently spent). I propose a 8%/8% tax on income like the Germans with an increase to the minimum wage of at least 8%. We are still going to see the percentage increase unless we get lots of younglings to contribute (it is the same problem as the S.S. but bigger - think large percentages of elderly in nursing homes at $70,000/yr - that is where we are heading).

As far as charitable contributions and estate taxes, we should bring estate taxes back and possibly exclude charitable deductions as a form of avoiding paying taxes (this might also apply to the living creating these foundations - why should they be done on the taxpayers dime). Every taxable event should be taxed. Defining what a taxable event is and actually capturing it is always a question. Wage slaves have few options. The richer you are, the better ability you have to flee tax structures even to the point of escaping wage taxation by leaving the country and becoming a citizen of another country. Atlas Shrugs is real. Rich people need to get something for their money or you will ensure that no rich people will exist (just the power elite with their private drivers and dachas). The rest of us will be standing in line for the government provided food.

[bottomtheweaver]

9. The trust fund exists, deal with it, and it's up to $2.4 trillion, not 2.1

or $2,418,658 million in 2008 to be exact. And unless the US goes bankrupt, it's as real as money gets.

http://www.ssa.gov/OACT/STATS/table4a3.html

Please stop claiming otherwise.

[exboyfil]

10. The trust fund holds Treasury obligations

I really really want that "Trust Fund" to exist since I spent the last 25 years paying more than my fair share into S.S. on the promise that I am covering my future benefits with current year dollars. The "Trust Fund" holds Treasury securities - those same securities we need to sell more of to the Chinese and Japanese to pay for TARP, other bail outs, Stimulus I, Stimulus II, the deficit in the regular budget, the Iraq War etc. My numbers were for the approximate amount at the end of 2007. What's $.3T when we are talking $11T+ though.

As long as the political votes exist to continue S.S. in its current form, then the "Trust Fund" has some meaning. We will just need to increase general revenue taxes, decrease general revenue spending, sell more debt, or increase the dollars going into S.S. (which should in theory be to extend the benefits for those after 2042 (or probably an earlier date now) when the "Trust Fund" is exhausted). What can't happen would be monetizing the current debt which will just speed up the day when the "Trust Fund" is fully depleted (COLAs meet monetization so to speak).

Think about S.S. this way. It started out at 3%/3%. It is now at 6%+/6%+. I don't want my children/grandchildren facing 10%/10%.

[bottomtheweaver]

12. When we default on our debt obligations to China and Japan, let me know.

I don't see us going bankrupt anytime soon. As to the need repay the obligations from the general fund, yes, income taxes will need to be raised, defense spending will need to be reduced, or both, perish the thought. The FICA payroll tax does NOT need to be raised. Have you looked at where the trust fund is going? Up up and away. The looming Social Security "problem" is complete propaganda:

http://www.ssa.gov/OACT/STATS/table4a3.html

And by the way, there are lots -- tens of millions -- of payees into the trust fund who have no hope of collecting benefits because they're using false numbers. They don't mention that in the doomsday projections, but it's just one more reason not to take them seriously.

[exboyfil]

14. I made one proposal to change S.S. in the near term

Raising the rate to infinity (so long as those folks get to participate at a 15% rate like those making $50-$100K. Alternatively you can decrease the percentage for them to get to the final number that acturiarly matches). I think it is just a matter of fairness. Thank goodness right now for the two income families in which each person makes $100K, they are carrying much of their system on their backs (remember the spouse is entitled to a half share of S.S. of his/her spouse). Effectively one of the spouses is working for income at a 7.5% rate (or at least until one of them dies). I would then reduce the S.S. withholding percentages for everyone with the additional dollars (assuming the remaining elements - intergenerational funding of benefits etc gets fixed).

As far as going bankrupt and defaulting. Lets watch what happens in the next couple of debt offerings. We don't even need to be in danger of default, we just need to have enough folks with dollars turn their noses up at the next offerings to be in a real world of hurt. We even have the Fed talking about buying part of the debt offering?? Where is this going?

Actually I would like to go back to Hannah Bell's earlier suggestion of a pay as you go system with rigorous caps on the withholding percentages (say no more than 7%/7% but the number can be debated). If the income is not there to pay benefits, then benefits get reduced across the board by the shortfall. Hannah Bell thinks that even something lower than the current rate is sustainable over time. I disagree with this point, but the whole concept of the "Trust Fund" was a mistake at its inception. Now that it is created though, I want it to be fair to the S.S. system (to the point of cutting other General Revenue expenditures etc as needed).

Read my post. I never said S.S. was a looming problem. It is the budget deficit that is the elephant in the room (along with finding a funding source for Medicaid/Medicare that is actuarially sound).

As far as I am concerned, S.S. is the best pension system we currently have in this country (if you consider it in a vacuum). Saying that the "Trust Fund" runs out in 2042 is not a problem for me because the time horizon is so far in the future to make it meaningless right now. I would be much more concerned about the Defined Benefit pension plans (most of public employees) that have assumed 8% rate of return on investments to be actuarially sound. Since they have lost 20-30% of their portfolio since those assumptions where made, how do you think they are doing now?

The problem is that S.S. holds one investment in its portfolio - U.S. Treasuries. Do I think the S.S. checks will keep flowing and be the last thing to go down? Yes probably. We will monetize the debt, return to 10% inflation rates, see COLA adjustments go up to 10%, monetize more debt, and watch inflation/COLAs continue to spiral upward. Those on fixed income pensions without an inflation adjustment (as well as those not invested in inflation protected investments) will fall back on S.S. being their only source of retirement funds that have any meaning. The increasing COLAs are going to drive the date for "Trust Fund" depletion closer.

2018 (or more likely 2017) is going to be a really interesting year.

[Igel]

20. Apples and termites.

To default to the SSA is to default to a government-internal entity. It's like having the NSA owe money to the CIA--if Congress decides to declare it null and void or find some paper transaction to make the debt go away, it happens. Defaulting to a group outside the US government is a different matter and would affect the US's credit rating.

As for the trust fund, imagine this scenario: Over the last 6 years you've put away money for a new car every month. It's in a cookie jar. You should have $30k for it. You go to get it, and you find that your wife (or some other family member) has taken the money and put in IOUs. You're not worried--your wife can just repay the $30k out of the family's income. Does that make sense? If the family could spring for $30k why save up money? No, you have three choices: A real cash crunch, reducing lots of expenses to cover the $30k; get another job; or you take out a loan from outside the family. The first may be painful, too painful; the second may not be possible or may hurt the family too much; the third might be possible or not, but will be painful because then you'll have interest payments. There's a fourth choice: Get a used car for $5k.

General tax revenues will have to pay back that $2.2+ trillion over the course of 20 years. That means $100 billion from general revenues per year, on average, until the pile of IOUs is paid off. Either it'll cause general spending to be cut, taxes will have to be raised, the national debt will be increased, or SS benefits will be reduced. Notice who suffers from the first three: Non-retirees or their children; only retirees suffer for the fourth. Race and ethnicity also might well play into this.

The only way out is for productivity and wages to increase to the point that FICA revenues are always at least roughly equal to FICA outlays, without ever needing to dip into the "trust fund." That's unlikely, IMHO, because the number of retirees will become much larger compared to the number of workers than is now the case.

[bottomtheweaver]

25. That's completely ridiculous.

Yes, some part of the "government" can declare that the moon is made of green cheese, but there are three branches and that's the reason. The US Treasury will not default on its obligations unless it declares bankruptcy and we're a long way from that.

As to the payback problem, yes sir, high-end income taxes are going have to be raised. Tough shit. With the tens of trillions spirited out of the Treasury by the uber-rich in the last 30 years to pay for their bailouts, tax cuts, and no-bid contracts, paying back a few lousy billion owed to the Treasury shouldn't be a problem, if it ever comes to that, and at this rate it won't -- I've seen no credible evidence that the SSA trust funds as currently structured will do anything but continue to balloon.

[Hannah Bell]

31. "Either it'll cause general spending to be cut, " the question is, whose spending?

i vote for the spending of the superich.

Rescinding the Bush tax cuts to the top 1% will pay off the entire TF over 10 years.

[NashVegas]

3. It Needs to Be Pointed Out, Relentlessly

That neo-cons, global capital imperialists and other totalitarians take their inspiration from Soviet-style communism.

[sandyd921]

4. Hasn't the financial crisis

sort of demolished the idea that getting rid of social security and giving everyone 401 K accounts and IRAs is the answer? As the stock market has bottomed out haven't the young (who are the chief target for these efforts) figured out that the "security" in social security is not a bad idea? If the so-called intellectuals at these foundations can't see this, one wonders about their connection to reality.

[ThomWV]

5. Any problems Social Security has can be solved by simply removing the cap

Thats it.

[Joanne98]

7. Save SS cut the empire budget.

[bottomtheweaver]

8. Part of the strategy seems to be talking up "payroll tax cuts,"

meaning FICA deduction "holidays" and other artful buzzwords bandied about by wingers on the telly. How convenient that the GOP first jacked up the payroll tax and now is ginning up resistance to it, and I agree about the foundations, which are basically big business by another name.

[Kansas Wyatt]

11. Social Security and Medicare tax on 100% of income, with no caps, and...

Stop spending Social Security and Medicare revenue as income tax revenue.

Holy Shit! The government would be able to cover retirement and disability 100% then, instead of limited coverage they offer now. Greedy rich pricks and/or there Republican shit-stains would be screaming and crying about not being able to fuck everyone over anymore.

[dajoki]

13. These "foundations"...

are funded and run by the richest people and big business, I don't care whether they are liberal or conservative. They are looking out for themselves, and that's why privatization of SS is being sought. We can thank the Heritage foundation, among others, for Raygun's cuts of social programs, Gingrich's "contract" and "welfare reform". If the leberal groups get in on it we will be "thanking" them for finishing it off.

[L0oniX]

15. Well if anything the huge losses with 401k's and stocks has shown that privitaization...

would have failed.

[madfloridian]

16. We fought Bush so hard on this...only to have to fight our own party.

Sad and tragic.

This article needs to be reposted often.

[fascisthunter]

17. if Social Security is Attacked and Destroyed we will see a revolution

in the future. I have no doubt about that.

The wealthy in this country have been exposed along with their Republican bitches, now we see those within our own party who still represent the wealthy over the will of the people.

[bobbolink]

29. I wish you were right on that. Europeans are the ones revolting, not us!

We don't have the spine to speak out and take action.

[JHB]

18. Whenever you hear "entitlement reform" reach for your phone...

...and call your congresspeople and let them know cuts to SS are NOT "on the table".

Some people have pointed out that the hits 401Ks have taken should strengthen SS or cut down reform clamor. That's making the mistake of thinking logically, or rather, assuming that the anti-SS press is motivated by logical analysis of circumstances. It's not. It's motivated by pure greed reinforced by those ideologically against SS "because government shoudn't be involved with that" (i.e., useful idiots).

The CATO paper mentioned laid out the strategy. They'll take any opportunity to chip away at SS if they're allowed. There's no room for compromise when the other side's goal is elimination.

[Odin2005]

19. IMO SS should be exanded into a full-blown national pension system.

And raise corporate taxes to pay for it. If Companies want to get rid of their pension plans then we should make them pay taxes to pay for a government-run replacement.

[bvar22]

21. The REAL threat to Social Security is NOT The Republicans.

The REAL threat is from the "Centrist Democrats".

One of the primary goals of the DLC is to destroy Social Security.
They don't talk about it publicly too much anymore, but they have never given up their lust for this money.

Beware the euphemisms like "Entitlement Reform", "Modernization", or even the Orwellian "Protecting Social Security".

The "Centrist Democrats" in union with the Republicans WILL BE COMING AFTER THIS MONEY!

The bad news is:
Obama is a "Centrist Democrat", and his Economic Team are all "Centrist Democrats".
Obama's largest source of campaign funding during 2008 was Wall Street.

My stomach gets tight every time I hear Obama mention "Entitlement Reform".

The DLC, whose purpose is to realign the Democratic Party away from its traditional alliance with the AFL-CIO, is strongly leaning toward NCRP-style privatization. The November/December 1998 issue of The New Democrat, the DLC's bimonthly magazine, is filled with a series of pro-privatization stories under the heading "Less Than Secure: Rebuilding Social Security for the 21st Century"; it includes a piece by Senator Breaux outlining the commission's proposals.

http://www.thenation.com/doc/19990208/dreyfuss/4


---------------

[leftstreet]

22. Obama Pledges Entitlement Reform

These headlines make me sick whenever I see them
:puke:

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/15/AR2009011504114_pf.html
Obama Pledges Entitlement Reform
President-Elect Says He'll Reshape Social Security, Medicare Programs
January 16, 2009

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.

http://www.nytimes.com/2009/01/08/us/politics/08obama.html
Obama Promises Bid to Overhaul Retiree Spending
January 7, 2009

WASHINGTON — President-elect Barack Obama said Wednesday that overhauling Social Security and Medicare would be “a central part” of his administration’s efforts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs.

:puke:

[kiranon]

24. The Republican leadership has always wanted to do away with SS.

Centrist democrats are not wealthy or wealthy wannabes who want to do away with Social Security. Now that pension plans have been decimated, Social Security is even more important than ever. Agree that some one is trying to pit different age groups against each other but we all grow old and we all see our parents needing help as their retirement funds disappear in this economy.

[bvar22]

32. The Republican Leadership HAS always wanted to kill SS....yes.

What you don't seem to realize is that a good portion of the Democratic Leadership also wants to give this money to their friends.

Republicans + DLC/Centrist/NewDems = Goodbye Social Security

Be Ready.
Forewarned = Forearmed

I expect Republicans to represent the RICH and Connected.
I don't blame a snake for being a snake.

When DEMOCRATS cross over and join the Republicans working AGAINST The Democratic Party, I feel betrayed.....
AND
I don't forget.

[Tierra_y_Libertad]

26. Triangulation again? Remember "Welfare Reform"? Lotsa room under the bus.

[bobbolink]

30. How quickly we forget. Especially when we think it doesn't affect US.

It's all about US.

Forget the other person.

We can't seem to grasp that we are all connected.

[leftstreet]

23. K&R

[MajorChode]

27. There IS economic conflict between the generations

Trying to pretend otherwise is turning a blind eye to reality. Look at what Raygun did to SS in the 80's. Look at what even just proposing any changes to SS did to Bush II. I'm not saying Shrub had any ideas worth any merit, I'm just saying the older generations have an extremely powerful lobby. Anything which can be construed as weakening SS is a poison pill to any politician, and furthering the idea that SS is in trouble translates into votes.

And just exactly what lobby do younger Americans have? They have none. That's why SS is a 12.4% ball and chain to every working American and SS is still not sufficient to keep older poor Americans above the poverty line.

The Pew Research Center has some very bad ideas, but that doesn't mean there isn't economic conflict between the generations.

We should have comprehensive welfare that helps ALL people who need it, and not just the elderly (some of which who DON'T need it). We should have comprehensive health care that covers ALL people, and not just older people.

[bobbolink]

28. "effort to provoke conflict " THAT is the nub.. and the UGLY. AND, it always works.

It works right here at DU.

So, expect it.

Life in the US is shit. Because we allow it.

[GeorgeGist]

33. The bottom line is profit ...

and profit is theft.