The Raiders of Your Lost Retirement are busy laying plans in Washington. Will Obama help them if re-elected?
October 5, 2012 | Watching Wednesday night’s presidential debate, you’d have to be a crack political code reader to know what Obama was really saying about Social Security. It was quick. It was subtle. But it was one of the most telling moments of the debate.
First, let’s get a few things straight. Social Security is solvent. It’s America’s most successful retirement plan to date. It’s extremely popular across party lines. Social Security adds not a penny to the deficit. And, as Nancy Altman has argued, it's “the poster child for fiscal responsibility.” The program is prudently managed, cost-effective, and carefully monitored.
Obama could have mentioned these facts and cheered the success of a program that Democrats – and all Americans -- should be proud of. Instead, the discussion went like this:
“Lehrer: Do you see a major difference between the two of you on Social Security?
Obama: You know, I suspect that, on Social Security, we've got a somewhat similar position. Social Security is structurally sound. It's going to have to be tweaked the way it was by Ronald Reagan and Speaker -- Democratic Speaker Tip O'Neill.”
Ladies and gentleman, that was the sound of your president offering to screw you on your retirement. This revealing exchange was followed by some politically strategic talk by both candidates about how current retirees shouldn’t be worried, because, as we all know, their votes are needed in the short term. But the rest of us? Be very, very worried.
The Roots of Betrayal
There is a persistent myth, or, to put it more bluntly, an outright lie, repeated by Republicans, and, alas, many Democrats, that Social Security needs to be “fixed” in order save the government money.
The Republicans have been dying to kill Social Security ever since FDR signed it into law in 1935, and Ronald Reagan answered their prayers by delivering a blow in the form of a “tweak” that essentially robbed the program, as economist Allen W. Smith explains splendidly in a 2010 article in Dissident Voice.
Alan Greenspan was the architect of that fraud against the American people. The Dems jumped on board during the business-friendly Clinton administration at the behest of then-Treasury Secretary Robert Rubin. Clinton got very close to cutting a deal with Newt Gingrich to partially privatize the program. Had he succeeded, the 2008 financial crash and ensuing recession would have been even more devastating that they have been. As Robert Kuttner has noted, if we can be grateful for one thing from the scandal of Clinton's affair with Monica Lewinsky, it’s that there was too much distraction going on to push the plan through.
And who was right smack in the middle of this disastrous –and thankfully derailed -- negotiation? None other than Erskine Bowles, Clinton's Chief of Staff. You know, the guy whose name was on the lips of both presidential candidates Wednesday night and the man who is rumored to be at the top of Obama’s list for the next Treasury Secretary should he win his re-election bid. Bowles is the Corporate Democrat extraordinaire, and he appears likely to have a prominent role in a next Obama administration whether he gets the Treasury job or not. I like to call him "Cat Food" Bowles, in honor of his co-chairmanship of the National Commission on Fiscal Responsibility and Reform, the group Jane Hamsher of Firedog Lake aptly dubbed the "Cat Food Commission" for its assault on America's seniors.
If you were wondering if Obama will try to betray his base on Social Security if re-elected, this should pretty much answer your question. He’s poised to do it, and we have to shout from the rooftops that he will not get away with it.
The Success of Social Security
There was a time, a couple of generations back, when old age carried the threat of the poor house. In a more agrarian society, you hoped you had enough children to help support you to avoid this fate. Today, when people have fewer kids, not to mention shoddy retirement plans and disappearing pensions, there is very little to come between you and economic disaster in your golden years. Except Social Security. Today, Social Security benefits represent about 39 percent of the income of the elderly. The Center on Budget and Policy Priorities estimates that 45 percent of Americans over 65 would plunge into poverty without Social Security.
Taxed-advantaged 401(k)s and IRAs will help the affluent, but they will not do enough for middle and working class people in retirement. Plans to cut Social Security favored by Bowles and his partner in crime Alan Simpson, including raising the retirement age, are nothing more than bad policies based on economic falsehoods. As Nobel Prize-winning economist Paul Krugman pointed out recently in the New York Times, raising the retirement age is “totally at odds with the reality of an America in which rising inequality is reflected not just in the quality of life but in its duration.” Life expectancy, he reminds us, is actually falling for a substantial part of the nation.
When Social Security raiders claim that the program needs to be “fixed,” they are getting out their crystal balls and talking about 2033, when, according to forecasts by the trustees of the Social Security trust fund there might – key word, might – be a shortfall in revenues against predicted claims. And that’s only in the context of a very conservative view of economic growth. It might be reasonable to imagine that there could be adjustments that need to made a couple of decades down the road -- such as making the rich pay social security taxes on the money they make over the current low ceiling of just over $100,000 -- but there is no justification for doing anything now. The Raiders of Your Lost Retirement use the excuse of the Great Recession, which destroyed jobs and therefore revenue, to jump on the program and start shredding it.
Americans are smart enough to see through this. A 2011 poll shows that most do not believe the program is in crisis, despite all the political lies and posturing. In fact, most men and women would like to see benefits increased! Why? Because unlike Alan Simpson and Erskine Bowles, they are not wealthy, and after decades of of hard work they feel they have earned the right to a dignified old age.
The fact that Americans are not fooled by the political lies brings me to another point.
Remember, the long, hot summer of discontent in 2011, when all you heard about was the Bowles-Simpson deficit reduction plan and the manufactured crisis of the debt ceiling? The public disgust over that dismal spectacle set the stage for the Occupy movement to take off in early autumn.
If a re-elected Obama tries to cut Social Security while bargaining over a non-existent fiscal cliff, we might just get Occupy 2.0. Polls are clear: most Americans, regardless of political affiliations, support Social Security. They don’t want benefit cuts and they don’t want the retirement age raised. They know perfectly well that the idea of blue-collar folks working until seventy is cruel and absurd, and that the notion that there are jobs growing on trees for older Americans to pluck is completely out of touch with the ongoing employment crisis. It may be a long time before young people face the reality of retirement, but Generation X is starting to look that beast in the face. And they don’t like what they see: financiers making money hand over fist while plans to squeeze every penny out of future retirees is deemed acceptable in Washington.
Follow the Money
So why, despite the clear wishes of the American people. are so many politicians in favor of cutting Social Security? The answer can be found on Wall Street, naturally.
The whole idea of Social Security is anathema to American financiers, who not only dislike paying taxes but also would dearly love to see private retirement accounts on which they could charge fees. Find a financier moving around Washington, and you will find a Social Security raider. Economists Thomas Ferguson and Rob Johnson pointed this out some time ago in their article, “From New Deal To Raw Deal: The Real Economics Of Cutting Social Security.” They cite the case of Peter Orzag, the former head of the Obama administration's Office of Management and Budget, who has since accepted a position at Citigroup (love that revolving door!). Orzag has been known to express some very curious --and marvelously telling -- ideas about Social Security. On the one hand, he knows perfectly well that it has nothing to do with any so-called budget crisis. Ferguson and Johnson write:
“The first yellow flag is Orszag's frank acknowledgment that Social Security features barely at all in any putative budget short fall: ‘Social Security is not the key fiscal problem facing the nation. Payments to its beneficiaries amount to 5 percent of the economy now; by 2050, they're projected to rise to about 6 percent.’”
So why is Orzag a Social Security raider? Because he thinks like a financier:
“As Orszag frankly confesses, ‘even though Social Security is not a major contributor to our long-term deficits, reforming it could help the federal government establish much-needed credibility on solving out-year fiscal problems.’"
Bingo! In other words, Orzag is saying that politicians have to cut Social Security to prove to the markets that they can. Oh, the wondrous logic of free market fundamentalism.
A shredded Social Security program is most definitely what the financiers want. But it’s not what the American people want. It remains to be seen what will happen come November. If Obama wins, we can expect a split in the GOP between moderates and conservatives. If the conservatives get the upper hand, they will be screaming for cuts to Social Security as the January 1st fake fiscal cliff deadline becomes the focus in Washington. Whatever happens in the GOP, if Obama relies on the advice of people like Erskine Bowles in negotiations, your retirement is not safe. Any politicians who think they can ignore the express wishes of the American people will have earned every ounce of trouble they get. Let’s make sure they see a whole lot of it coming.
Lynn Parramore is an AlterNet contributing editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' Follow her on Twitter @LynnParramore.