[Mb-civic] Bush and co. plans clarified--to destroy Social Security & Medicare

[ean at sbcglobal.net]

Here, on the 60th anniversary of the death of Franklin Delano 
Roosevelt, are two very important articles (the first fairly short, the 
second longer) about the rightwing's plans to destory social security 
and Medicare as we know it.  This doesn't have to happen but it sure 
does behoove us to understand what is happening, see thru the 
propaganda, and then act on our knowledge.  So this is worth reading 
and sharing....


Published on Sunday, April 10, 2005 by CommonDreams.org
http://www.commondreams.org/views05/0410-25.htm

Younger Workers and Social Security: Privatization of 
the Program Undermines Their Future
by Seth Sandronsky
 

These are tough time for many younger workers in the U.S. Real 
wages, what they can actually buy with their pay, are falling. The costs 
of gas, health care and shelter are climbing. Student loans to attend 
college are fueling debt for younger workers. Meanwhile, workers age 
20 to 24 got about 4% of the new jobs created in the year ended March 
2005 versus 42% for workers over age 55. Squeezed from many 
directions, some younger workers fear that Social Security will not be 
around for their retirements. The Bush administration is playing on that 
fear. It is fed by some reporting in mass media.

A Washington Post article said younger workers "have the most to 
gain" from President Bush's plan to create private accounts to fund 
Social Security (3-15-05). A Christian Science Monitor article said a 
change to private accounts from the current system of payroll taxes 
would "sweeten the system for younger workers" (3-3-05).

Both articles are incorrect on private accounts for younger workers. 
How? The private accounts invested in the stock market would pay, 
barely, for the administrative costs of such investments. Thus there is 
no net gain for younger workers. For more information, see the 
Accurate Benefit Calculator. 
http://www.cepr.net/pages/sscalculator.htm

For a preview of retirement funded by the stock market, younger 
workers should look to workers over age 55. They are flooding into the 
job market because their 401(k) retirement plans in the stock market 
have dropped in value. That factor helps explain why older workers 
took roughly half of the new jobs created in the U.S. for the past year, 
says Dean Baker, co-director of the Center for Economic and Policy 
Research in Washington, DC.

Retirements for American workers have not always been so shaky. 
"Between 1979 and 1997, the share of employees with defined benefit 
plans-meaning that the plan promised a specific level of support-fell 
from 87 percent to 50 percent (The State of Working America, 2002), 
writes Michael Perelman, author and economics professor at CSU 
Chico. "Today, about 85 percent of private contributions are for defined 
contribution plans in which individuals decide how much to contribute, 
how to invest their assets in the plan, and how and when to withdraw 
money from the plan. The level of support that the plan provides for 
individual workers depends upon their success in investing. These 
plans appeal to employers because they shift the risk onto the 
employee. Because appreciation of stock prices helped to fund the 
defined benefit plans, the collapse of the stock market bubble in 2000 
accelerated the transition to the defined contribution plans" 
(Manufacturing Discontent: The Trap of Individualism in a Corporate 
Society, 2005).

Currently, workers can't outlive their Social Security benefits. These 
benefits are their lifelong source of income. By contrast, younger 
workers can certainly outlive the cash built up in the private accounts 
that the Bush White House is pitching. When their private accounts in 
the stock market run out of cash, younger workers will have to seek 
other retirement income.

Why is there such a difference between private accounts and Social 
Security? Social Security is a program of social insurance. It is not an 
investment program. As such, Social Security is funded by a payroll tax 
paid equally by employees and employers. Workers contribute 6.2 
percent of their wages to Social Security, with their bosses making the 
same contribution). That payroll tax goes to current recipients-retirees, 
the disabled and survivors. Social Security is a pay-as-you-go system 
of social insurance.

Carving out private accounts from the payroll tax would weaken Social 
Security, Comptroller General David Walker told the House Ways and 
Means Committee on March 9. The private accounts would suck funds 
from Social Security. Plus, private accounts would be subject to the 
administrative costs of Wall St. financial firms, and the shaky stock 
market. "Young people would likely face the largest benefit cuts from 
privatization," Baker adds.

Beginning in March, President Bush, Vice President Cheney and 
Treasury Secretary have been traveling the U.S. to tell people that the 
popular program faces a funding crisis. They canvassed the nation 
from the Atlantic to the Pacific for 60 days in 29 states to spread the 
idea of revamping Social Security with private accounts as a way to 
save the program from bankruptcy.

"I think it is clear that the solvency concern is taking root," said 
Representative Jim Leach of Iowa (New York Times, 4-3-05). It would 
have been helpful if this article reported that Social Security is on 
sound financial ground to pay full benefits through mid-century. That is 
the view of the Social Security trustees and the Congressional Budget 
Office.

There is no Social Security funding crisis. Its future bankruptcy is pure 
fiction. Government programs do not run short of money. Think about 
it. Where is the shortage of U.S. tax dollars for the Iraq occupation? 
When has the Pentagon held cookie sales for a new weapons system 
due to a cash shortfall? The financing of Social Security is a political-
not an economic-issue.

The program has from its birth in the mid-1930s been under attack by 
the U.S. upper class. For them, the "crisis" of Social Security is that it 
protects working people from living in poverty. Friedrich Hayek has a 
section on "The Crisis of Social Security" in The Constitution of Liberty 
(1960). It lays out the privatization program that U.S. workers face 
now, according to John Bellamy Foster, editor of Monthly Review.

Climate change is a crisis. Privatizing Social Security will cause a crisis 
for younger workers when they retire. They don't need that. It is in their 
class interests to fight Bush's privatization of Social Security.

Seth Sandronsky is a member of Sacramento Area Peace Action and 
a co-editor with Because People Matter, Sacramento's progressive 
paper. He can be reached at: ssandron at hotmail.com

-----------------------
Death by Design:
The Plot to Destroy Social Insurance

http://www.blackcommentator.com/133/133_cover_rockeymoore.html

Our nation’s political leaders are looting the federal treasury and they 
expect ordinary citizens not to notice.  Last week’s coverage of the 
release of the Social Security and Medicare Trustee’s Report proves 
one thing about contemporary news:  Those who control the mic, 
control the sound byte
and our perception of reality. 

Despite the Trustee’s report clearly showing the more immediate 
financial problems facing the Medicare program – which they projected 
will become insolvent in the year 2020 – most mainstream news 
sources focused on the Trustee’s less dramatic Social Security 
estimates which moved up the date at which the trust fund is expected 
to be “exhausted” from 2042 to 2041.

How has it come to pass that we are actually facing a short-term crisis 
in Medicare but the nation is fixated on the more distant Social Security 
shortfall?  More importantly, how does this bait and switch tactic 
obscure the likely impact of Medicare’s financing problems on the 
millions of African American elderly, disabled, and poor people who 
rely on the program as their only source of health care?

We can’t blame “Medicare Myopia” on the Trustee’s report which 
clearly relayed that the system would need an immediate 107 percent 
increase in income (tax increase) or an immediate 48 percent 
decrease in outlays (benefit cut) in order to bring its financing into 
balance.  We could, however, look to how the report was released for 
clues as to why many media sources overlooked the most important 
part of the story.

Ironically, out of six total Trustees only the four members serving in the 
Bush Administration participated in the report’s release.  And they – 
perhaps knowing that the media would focus on their spoken words 
instead of reading the report – chose to focus their remarks almost 
exclusively on Social Security.

But the stark nature of Medicare’s financing problem, its relationship to 
Medicaid, and the reliance of African Americans and other vulnerable 
populations on these vital programs, (see "Structured Inefficiency: The 
Impact of Medicare Reform on African Americans,” Rockeymoore) 
means that it is critical to move beyond mainstream sound bytes and 
headlines to figure out what is really going on. 

The Medicare Slight of Hand

When the Medicare Prescription Drug, Improvement, and 
Modernization Act was signed into law by President Bush in December 
of 2003, many fiscal conservatives expressed outrage that the 
Administration and their Congressional counterparts would ignore their 
party’s philosophical tradition of fiscal conservatism that called for 
relieving taxpayers of “unnecessary” burdens, particularly entitlement 
programs like Medicare, by shrinking big government.

So when President Bush and Congressional Republicans pushed 
through a historic expansion of Medicare to include an uncapped 
prescription drug benefit, health savings accounts, and huge subsidies 
for Health Maintenance Organizations (HMO) and Preferred Provider 
Organizations (PPO), it came as a nasty surprise to fiscal 
conservatives who were dismayed at the estimated $400 billion price 
tag reported at the time.

Many political observers inside and outside the beltway assumed the 
push for expanded prescription drug benefits represented an election 
year ploy to attract or neutralize senior citizens, a reliable voting bloc, 
and to make good with pharmaceutical companies and health 
maintenance organizations who would likely respond in kind with 
generous campaign donations.   

It seemed a distracting curiosity when it was revealed that the 
Administration went to great lengths to hide the true cost of the bill 
prior to its passage – threatening to fire Medicare’s chief actuary 
Richard S. Foster if he revealed his higher cost estimates of $500 
billion to $600 billion to Congress. 

The ante was raised in early February of 2005 when the White House 
finally acknowledged that the actual cost of the Medicare drug benefit 
would reach anywhere from $720 billion to $1.2 trillion in its first 
decade of operation alone – more than double the cost of the original 
estimates.

Now that we see the Administration’s approach to Social Security 
privatization and examine it in light of its contorted approach to the 
Medicare bill, it may be that the election-year motives originally 
ascribed were too simplistic in hindsight.  For a pattern is emerging 
that may very well signal a more ominous plot to destroy the social 
insurance nature of Medicare and Social Security.

Privatizing Social Insurance

A simple analogy may help us understand the nature of the issues our 
country is facing.  When the Jackson family’s spending habits showed 
that soon they would be unable to pay their bills, family members 
worked more hours (found additional income) and ate oatmeal in place 
of steak (trimmed expenses) to prevent financial ruin.  If the Jackson’s 
had ignored their looming fiscal insolvency and instead decided to 
purchase a Ferrari and an Olympic-sized swimming pool, they were 
certain to default on their mortgage and lose their home.

Like the Jackson family, Medicare’s Hospital Insurance (HI) trust fund 
was already facing a long-term inability to meet its financial obligations 
due to rising health care costs and reduced tax revenue caused by the 
recession when the 2003 Medicare legislation was enacted.  Instead of 
generating additional revenue or trimming expenses to place Medicare 
on a solid financial footing, the Administration and Congress bought a 
Ferrari, swimming pool and an island in the South Pacific – in effect, 
adding prohibitively expensive programmatic expenditures in the form 
of an uncapped drug benefit that enables pharmaceutical companies 
to charge seniors and the government as much as they like and 
massive subsidies to prop up HMO’s that have already proven their 
inability to provide consistent, quality care for seniors. 

As a result, passage of the Medicare legislation sped up the date at 
which the program would be unable to pay full promised benefits by 
seven years – from 2026 to 2019.  (The latest Trustees report pushes 
this date back one year to 2020.)  

So what is the real reason why conservatives disregard their fiscally 
conservative political base to add expensive program features that are 
not sustainable?  It is highly probable that they are setting Medicare up 
for failure and building the case for privatizing all social insurance 
programs within the next 10-15 years.

This theory would sound conspiratorial except for the fact that we now 
see a similar pattern emerging in the Social Security debate.  Basic 
facts are the same: the Trustees estimate that Social Security will face 
a long term funding shortfall in the year 2041.  Instead of addressing 
the shortfall, the Administration proposes to create expensive private 
retirement accounts that add huge financial burdens to the system that 
cannot be sustainable in the long term. 

Like Medicare, the Center for Budget and Policy Priorities estimates 
that the addition of private retirement accounts, expected to cost 4.9 
trillion over two decades, would accelerate the date of Social Security’s 
insolvency by about eleven years – from 2041 to 2030. 

Once social insurance programs have imploded under the weight of 
their fiscal pressures, the Administration schemes leave an escape 
hatch for privatization.  In the case of Social Security, they will simply 
transition individuals completely into private retirement accounts – 
making them solely responsible for shouldering the burden and risk of 
meeting their retirement needs through private savings and stock 
market investments.  Under this scenario, Social Security’s survivor 
and disability benefits – if maintained – become dramatically reduced 
and morph into means tested, welfare-like programs that depend upon 
general revenue transfers to stay afloat.

In the case of Medicare, the privatization escape hatch are the Health 
Savings Accounts and the HMO’s/PPO’s that received such favorable 
and prominent treatment in the 2003 legislation.  Touted as a new way 
to help Americans save for future health needs, the Health Savings 
Accounts will likely be expanded in a future where individuals are 
expected to carry a heavier financial responsibility for their health care.  
Similarly, the 2003 Medicare law expanded the role of private insurers 
by providing them with government subsidies and other benefits to give 
the illusion that they are more efficient when compared to the 
traditional Medicare program.  Thus, setting the stage for the 
elimination of Medicare.   

In either scenario, it doesn’t take a rocket scientist to project the type 
of arguments that will be made as the looming date of insolvency 
approaches for both programs and the nation buckles under the weight 
of the costs.  In early March, Federal Reserve Board Chairman Alan 
Greenspan gave us a glimpse of them when he reportedly warned 
House Budget Committee members that benefits promised under 
Social Security and Medicare were unsustainable and would cause 
severe economic consequences for the economy if not retooled.  What 
did Greenspan identify as his preferred alternative to social insurance?  
Private individual accounts.

Impact on African Americans

There is no doubt that the destruction of Medicare would have drastic 
consequences for African Americans of all ages – but especially black 
seniors and many with disabilities who also rely on Medicare for health 
coverage. 

Medicare has had a particularly positive impact on the quality of life for 
African American seniors.  Prior to the program’s implementation in 
1966, African Americans received substandard treatment in 
segregated hospital facilities when they received treatment at all.  By 
requiring hospitals to prove they weren’t practicing racial discrimination 
in order to receive federal funds, however, the Medicare program 
served as the catalyst that enabled older African Americans to receive 
equal access to affordable health care coverage.  It is important to 
note that since the passage of Medicare life expectancy has increased 
by 20 percent.

Today, reflecting historical education and labor market inequities, 
African Americans are more likely to be among Medicare’s lower-
income beneficiaries.  According to the Kaiser Family Foundation, 
while 40 percent of all Medicare beneficiaries have incomes below 200 
percent of the federal poverty level, 65 percent of African American 
seniors fall below this level.  As a result of their lower economic status, 
African Americans are also more likely to rely on Medicaid to 
supplement their Medicare coverage. (See , Rockeymoore, February 
10, 2005.) Black seniors are also twice as likely as whites to lack 
employer-sponsored supplemental health insurance.  Complicating 
matters is that African American seniors are much more likely to be in 
poorer health and to report having one or more chronic health 
conditions.

So, facing all of these complex challenges, what will happen to African 
American seniors or those who are disabled when Medicare is 
replaced with a privatized system of health care coverage?  It is likely 
that we will return to a pre-1966 two-tiered system where large swaths 
of the population will be unable to afford access to health care. 
Unfortunately, Medicaid won’t be there to help these people since the 
Administration is intent on also slashing that program’s funding. 

Thus, this scenario will likely result in even shorter life expectancies for 
African Americans.  But perhaps that won’t matter either, since Social 
Security won’t be there to provide them with guaranteed income 
support in old age if the Administration is successful in its privatization 
efforts.

Conclusion

In sum, it is clear that the Administration is following the tenets of its 
own version of the ownership society: give away the federal treasury to 
the “have and have mores” by bestowing tax cuts on wealthy 
individuals, huge subsidies for wealthy HMO’s, no-bid contracts for 
wealthy defense firms, and large transfers to wealthy Wall Street 
money managers hungry for Social Security payroll taxes.  Perhaps it 
is the height of irony that an Administration that came into office with 
historic surpluses is striving to leave office with a legacy of having set 
the stage for bankrupting the nation’s two premier social insurance 
programs – successfully mismanaging taxpayer’s money and trust in 
the process.

Dr. Maya Rockeymoore previously served on the Social Security 
Subcommittee of the U.S. House of Representatives Committee on 
Ways and Means, she is the co-editor of Strengthening Communities: 
Social Insurance in a Diverse America and author of The Political 
Action Handbook: A How To Guide for the Hip Hop Generation.


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