February 25, 2005


Peace of Mind VS. a Gamble: The Social Security Debate

By U.S. Senator Barbara Boxer (D-CA)

The White House has embarked on a mission to convince the people of our country that Social Security is in dire need of drastic change in order to save it for all workers.

In order to convince the American people of the urgency to privatize Social Security, the president has used words such as “crisis,” “bankruptcy,” and ”collapse.”

Let’s look at the definition of these three words, according to the Merriam-Webster’s Dictionary.

Crisis: “a situation that has reached a critical phase.”

Bankruptcy: “utter failure or impoverishment.”

Collapse: “to break down completely.”

Is it true that Social Security is in crisis? Is bankrupt? Is collapsing?

The answer is a resounding NO. According to the most conservative estimates, Social Security will be able to pay full benefits for 38 years. In other words, a 37-year-old worker today will get full benefits until he or she is 75 years old if we do nothing to make adjustments to the Trust Fund. A 47-year old worker today will get full benefits until he or she is

85 years old if nothing is done.

So clearly, Social Security is not in crisis, is not bankrupt, and is not collapsing.

Yes, there is a challenge we should address.

Have we ever faced a similar Social Security challenge before? Yes. During the Reagan presidency in 1983. Working together, Democrats and Republicans, we resolved the challenge then just as we can do now. So why would an otherwise optimistic George Bush turn into a prophet of pessimism on Social Security?

Because, his initiative is not about meeting the challenges of Social Security to keep it sound; it is not about bringing together Democrats and Republicans as Ronald Reagan did to ensure that full benefits will be there for all Americans. It is about one thing and one thing only: destroying Social Security.

How do I know that? Am I being partisan? Am I being unfair by stating in a very clear way that I believe the true goal here is to destroy Social Security? Not at all. I am simply telling the truth as told by this very White House.

On January 6, 2005, the White House wrote a Social Security memo. Although marked “not for attribution,” fortunately, we have it.

The most telling sentence in the entire memo is this: “For the first time in six decades the Social Security battle is one we can win - and in doing so, we can help transform the political and philosophical landscape of the country.”

Imagine: for six decades - that’s 60 years - the right wing has been after Social Security.

The memo also lays out the first priority for the White House and that is to “establish an important premise; the current system is heading for an iceberg” - thus explaining the use of the words “crisis,” “bankruptcy,” and “collapse.” By the way, he has also used the phrase “train wreck.”

So let’s talk about these scare tactics for a moment - the “iceberg” strategy. If someone told you that your family would be in solid shape for the next 38 years, you would probably breathe a sigh of relief because that would mean you had done everything necessary to prepare for the next 38 years to pay for your rent or mortgage, feed your kids, take care of your health care, and send your kids to college.

During those 38 years, keeping your eye on the future, you would have to try to earn more, save more, and prepare for that 38th year. You wouldn’t have to throw up your hands and sell your house. And you certainly wouldn’t call your situation a crisis. Frankly, we all face the fact that expenses go up over the years and our families need to prepare for those challenges.

When it comes to Social Security, President Bush not only wants to sell the house, but the car, the antique grandfather clock, and the wedding band. In essence, he is walking away from the foundation of America’s most successful insurance program using scare tactics.

So a message I have for the American people is this: beware of scare tactics and false information.

This isn’t the first time that this president has predicted the end of Social Security. In 1978, as a candidate for Congress, he predicted the end of Social Security by the end of 1988. He was wrong then, and he is wrong now.

But what is worse now, is the use of the full power of the presidency to do the following: scare the American people and hold out privatization as the savior of Social Security.

And if he succeeds, this is what will happen: he will turn Social Security from a guaranteed benefit into a guaranteed gamble.

Benefits will be cut an average of 45 percent. Millions will be thrown into poverty. Survivors, including children, who count on Social Security to protect them after the death of the primary earner will be left high and dry. Disabled workers who are protected by Social Security will be left to fend for themselves. Our budget will have deficits as far as the eye can see due to the interest costs on the trillions and trillions of borrowing that will be needed to make private accounts possible.

I can predict these outcomes because of studies that have been done on various privatization plans.

I was a stock broker once. I think there is an absolute place for market investments. But they should never be the basis of one’s retirement. They should be an additional piece on top of a basic, secure, guaranteed retirement benefit.

And, don’t ever delude yourself into thinking that this private account will make you rich. According to a recent study, a typical American who contributes to a private account for 40 years will get about $300 per month during retirement.

It is true that you can gain with a private account. But, you can also lose - and lose big. And when you have to pay the bills - including such urgent needs as food, shelter, and medicine - you can’t count on the stock market.

You can count on Social Security, and with every fiber of my being, I will make sure it is there not only for my generation, but for my children’s generation and for my grandchild’s generation.

Before Social Security, well over half of our elderly lived in poverty. Now, because of the guaranteed benefit - which averages just over $1000 a month for a man, and just under $800 per month for a woman - 10 percent of our seniors live in poverty. This is too high, but this dramatic reduction represents a monumental achievement, which is now in jeopardy.

What exactly does privatization of Social Security mean for Wall Street moguls? According to a study by the University of Chicago, Social Security privatization will put $940 billion into Wall Street’s pockets. And this will come out of the pockets of hard working Americans. The same study said that administrative fees for Wall Street firms will cut the value of your private account by 20 percent.

Let’s compare that to Social Security. Social Security does not have administrative costs of 20 percent. It doesn’t have administrative costs of 10 percent. It doesn’t have administrative costs of 5 percent. It doesn’t have administrative costs of 1 percent. Social Security’s administrative costs are one-half of one percent.

So follow the money. It leads straight to strong special interests.

Another message I have today is to people 55 and older: don’t believe a word the President says about your benefits being safe.

It simply isn’t true. It can’t be. And here’s why: in order to privatize Social Security and continue to pay your current benefits, the federal government will have to go into debt up to $2 trillion in just the next ten years - that’s up to $380,000 of debt every minute for the next 10 years.

When the choice is between the 20 percent of the American people who are retired or nearing retirement and the 80 percent of the people who will shoulder the burden of the extraordinary debt through higher taxes and higher interest rates, will the politicians respond to 80 percent of the people or 20 percent of the people? Even if they want to side with 20 percent of the population against the 80 percent, they simply will not be able to do that and remain in office.

Remember, when this borrowing begins - and if we lose this fight, it will be very soon - you will be getting the gold standard Social Security benefit and the rest of the country - nearly 80 percent - will be facing a benefit that is 45 percent less than yours. And for that hit, they also have to carry the burden of paying for your benefit through massive borrowing.

You don’t have to have a degree in Political Science to sense the outcome. If you’re 55 and older, you can’t count on a thing.

And, how cynical is it, that this White House believes that people over 55 only care about themselves. There are a lot of 75-year old seniors who care very much about what happens to their 45-year old sons and daughters. They care about their kids retirement. But, it’s a lot more than that - because Social Security is a lot more than that.

We should not forget that Social Security is not just a retirement policy. It is an life insurance policy. It is a disability insurance policy.

I am asking every Californian to go to my website - www.boxer.senate.gov - to sign my Social Security petition and stand with me in fighting to protect, preserve, and defend Social Security for all Americans.

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