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THE PROGRESSIVE POPULIST:
A MONTHLY JOURNAL OF THE HEARTLAND
May 1998 -- Volume 4, Number 5
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EDITORIAL
Stop Social Security Lies
Mark Twain said "A lie can travel half-way around the world while the truth
is still putting its shoes on." And the prophets of doom for Social
Security have a few years' head start.
To hear the alarmists tell it, Social Security will run out of
money when the Boomers cash in during the 2020s, leaving nothing for those
workers who are now under 40. This Social Security scare at best is
misleading; we don't think it is stretching to call it a lie.
According to the projections of doom, Social Security revenues will
be flush through the year 2018. Then, as the Boomers start to retire, the
fund will start drawing itself down until 2029, when, according to the
doomsayers, the fund will be unable to pay its obligations.
These pessimistic projections have been uncritically embraced by
most of the nation's corporate press. They are responsible for the
widespread belief by younger workers that they will never collect on Social
Security. Wall Street sees the opportunities in the Social Security Scare.
It is stampeding the policymakers in Washington toward some sort of
privatization scheme that would replace the Social Security annuity with
private investment plans that would mainly enrich stockbrokers and
investment bankers who would skim billions from the cash flow into the
stock market.
Republicans have been pressing to dismantle Social Security ever
since it was implemented in the 1930s. Now with the widespread
disinformation about Social Security's fiscal prospects they have gained
support from centrist Democrats such as Senator Daniel P. Moynihan of New
York, who recently proposed to cut the Social Security payroll tax,
significantly reduce benefits and embrace the private investment plans.
However, while President Clinton has set up a series of town
meetings to discuss what should be done to "save" Social Security, Robert
Reich, the former Labor Secretary who is a former trustee of the Social
Security trust fund, wrote in the May/June issue of The American Prospect
that Social Security is not endangered. "I can tell you that the actuary's
projection ... is based on the wildly pessimistic assumption that the
economy will grow only 1.8 percent annually over the next three decades,"
Reich wrote. "Crank the economy up just a bit, to a more realistic 2.4
percent a year ... and the fund is flush for the next 75 years. Even if we
have several recessions along the way, it's highly doubtful that the
economy will grow any slower, on average."
Doug Henwood, editor of Left Business Observer and author of Wall
Street (Verso) pointed this out in 1995: "Almost no one bothers to
investigate the claim of Social Security's coming insolvency ... I did ...
and discovered that the projections assume the economy will grow an average
of 1.5 percent a year (after inflation) for the next 75 years - half the
rate of the previous 75, and matched in only one decade this century, from
1910-20. Even the 1930s, the decade of the Great Depression, saw a faster
growth rate."
The Twentieth Century Fund, in a recent report, "Social Security:
The Real Deal," also noted the low-ball projections but added, "Even
without any adjustments to the system and slower economic growth in the
future, Social Security would be able to pay 75 percent of projected
benefits to retirees. What we are facing is a projected shortfall in thirty
years, not an imminent crisis."
Economist James K. Galbraith of the LBJ School of Public Affairs at
the University of Texas agrees that Social Security is not "underfunded,"
but he noted that the current level of funding really is not all that
relevant to the condition of the retirement fund in the 2020s. "Tomorrow's
Social Security will be paid by tomorrow's workers, out of tomorrow's
national product, according to benefit schedules set by law at that time,"
he wrote. "Those trust funds are just an accounting device, wipe them out
and nothing would happen; today's surpluses are just as irrelevant, in
economic terms, as tomorrow's deficits. Regressive payroll taxes today buy
jet fighters and aircraft carriers. It would not be a bad thing if, twenty
years from now, some progressive income taxes were used to pay for
pensions."
Privatizing Social Security might look appealing when the value of
American stocks have increased 30 percent in the past year. However, the
privatization advocates are either dishonest or sloppy in their claims that
stock market investments will yield an average return of 7 percent over the
next 75 years, the same period when the Social Security Trustees are
projecting economic growth to average only 1.5 percent.
"Privatization advocates cannot have it both ways," the Twentieth
Century Fund reported in "Social Security: The Real Deal" (on the Internet
at www.tcf.org/realdeal.html). "If the market continues to yield 7 percent
returns for the next 75 years, the economy will have grown much faster than
1.5 percent annually, and Social Security will be so flush with increased
FICA contributions that there will be no need to fix a system that isn't
broken. And if economic growth does indeed turn out to be anemic, market
returns will be, too."
In fact Dean Baker, an economist at the Economic Policy Institute,
in 1997 calculated that if the Trustees' low-growth projection is correct,
the average rate of return on equity investments would be in the
neighborhood of 4.4 percent, so retirees who were counting on mutual funds
to pay for their golden years would still face a shortfall. "In the final
analysis, stock market advocates are hoist on the petard of their own
economic projections," the Twentieth Century Fund concluded.
Republican congressional leaders have talked about financing
personal investment accounts with the budget surplus. However, these are
the same crocodiles who promised a vote on campaign finance reform.
Call your senators and congressional representative at 202-224-3121
or toll-free at 1-800-504-0031 and tell them to oppose any bill that would
undermine Social Security, increase the payroll tax, cut benefits or extend
the retirement age. If they want to "fix" Social Security, tell them to
extend the tax to those people who earn more than $68,400 a year.
Don't Deregulate Banks
First Citicorp and Travelers Group announced plans to merge in defiance of
the federal law that prevents banks, securities firms and insurance
companies from owning each other. Then NationsBank announced a merger with
Bank of America to form the country's largest chain of banks. Banc One also
announced plans to merge with First Chicago.
Regulators at least should examine the bank mergers closely to
ensure that these giant banks serve their communities and particularly poor
neighborhoods. The federal government should take steps to ensure the
viability of smaller, community-oriented banks and credit unions.
Congress should stand up to the newly formed financial behemoth
Citigroup and reject HR 10, the financial deregulation bill that would
effectively remove barriers between banks and investment services. The bill
is expected to come to the House floor in May and congressional leaders are
beginning to talk as if the "Citigroup" deal makes it inevitable.
If approved, the bill would set the stage for further consolidation
of the banking and financial services industry. That not only could wipe
out independent competition but it could set up the taxpayer-funded deposit
insurance system to bail out banks that are threatened by the insolvency of
their insurance affiliates, as the International Monetary Fund has been
used to bail out bad investments in Mexico and Asia.
Deregulation was disastrous for savings and loans in the 1980s and
it has resulted in consolidation of TV and radio stations as well as higher
cable TV rates in the 1990s.
Call or write Congress and urge them to vote no on HR 10, the
Banking Deregulation Bill.
- Jim Cullen
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TABLE OF CONTENTS, May 1998:
(Articles marked with * are available at our web site,
http://www.eden.com/~reporter.)
COVER/Don Hazen
Overswooshed: Nike on the Ropes *
EDITORIAL *
Stop the Social Security Lies
Don't Deregulate Banks
JIM HIGHTOWER
The Fraud of Portable Health Insurance
Probing Consumers' Naked Behavior
Stock Wealth
Homemade Economic Growth
Pentagon Screwiness
Consumer Choice in Banking
LETTERS TO THE EDITOR *
REFLECTIONS/Gary Dugger
Railroaded, Still Standing *
RURAL ROUTES/Margot F. McMillen
ABCs of Agriculture *
DISPATCHES *
Corporate Shell Game
Oakland OKs Living Wage
GRASSROOTS/Hank Kalet
SPIN Control
NATIVE GROUND/Randolph Holhut
America: Still 1 Nation, 2 Societies
CALAMITY HOWLER/A.V. Krebs
Bill Lehmann: 'Concerned Citizen' RIP *
WASHINGTON WATCH/Doug Ireland Dark Horse: Wellstone in 2000
REPORT/Sue Wall
Towards 2000 in 2000: Union Candidates Raise Working Class Issues
LABOR TALK/Harry Kelber
No Worker Rights Bills?
REPORT/Karen Charman
Mobile Chernobyl:
Rolling Nuclear Thunder *
THE SCOOP/Bob Harris
The Cuban Menace
CORPORATE FOCUS/Russell Mokhiber & Robert Weissman
The Art of Misnaming Lobby Groups
REPORT/William Bole
Dissident Shareholders Win Louder Voice at Corporate Annual Meetings
REPORT/Karen Winner
New Weapons to Battle HMOs
HEALTH CARE/Joan Retsinas
The NYP Index
LOCAL VIEW/David Morris
Surviving Electronic Commerce
MADE IN THE USA/Joel D. Joseph
The Germans Are Coming!
NATIVE INTELLIGENCE/Jack Forbes
Raising the Bloody Flag of Racism
PROGRESSIVE REVIEW/Sam Smith
Flat Tax, Fat Breaks
PRIMAL SCREED/James McCarty Yeager
Time and Again *
JOHN BUELL
Battle Over Minimum Wages *
GLOBAL CITIZEN/Donella Meadows
Sierra Debates Immigration, So Should We
MEDIA BEAT/Norman Solomon
Diversity Fatigue
AMERICAS/Gonzales & Rodriguez
Rename El Niņo
TED RALL
Hooked on Phonies
JESSE JACKSON
Addition or Derision
IN THE PUBLIC INTEREST/Ralph Nader
Big Money Seeks Its Own Rules
HAL CROWTHER
The Sins of the Fathers
CHARLES LEVENDOSKY
Watch Your Back, Mack
The Politics of Endangered Species
MOLLY IVINS
Raspberries for Big Bank Megamergers
High Tech: Cry Me a River
The Losers are Us
CHARLIE WILSON
New Patriotism vs. Old *
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