Contrary to what you may have heard, the sky is not falling – to put it another way, the reports of Social Security’s death have been greatly exaggerated. This doesn’t mean that the Social Security system is perfectly fine and we should go about our daily lives never worrying about the future, but the system is not nearly in as imminent danger as some would have you believe.
This isn’t the first time we’ve had to fix Social Security. As President Clinton said in 1998, keeping Social Security is “the great challenge of every generation.” As we look toward Social Security’s future, one solution that has been proposed is private accounts invested in the stock market. Let me be clear – no single idea could be more dangerous or antithetical to the idea of Social Security.
The whole point of Social Security is to reward a lifetime of work with a guaranteed minimum level of income at retirement to insure against stock market losses. Any “voluntary” plan to divert payroll taxes into private accounts goes against this fundamental reason Social Security exists.
The problem is that private accounts won’t save Social Security at all – quite the opposite: they will cost the system money. Current benefits are paid out from payroll taxes, and any effort to divert those taxes into private accounts will hurt the system, not help it.
Republicans have gotten smart about this. They call their plan “reform.” And, at first glance, private accounts would seem like a good idea. But we have already seen what private accounts are like in the form of 401(k)’s – you could ask the folks at Enron why they wouldn’t want the stock market to determine their retirement future.
Republicans will tell you their plan is voluntary; what they won’t tell you is that the reduction in Social Security benefits to pay for their plan isn’t. Investment will be required to make up the difference.
Wall Street loves the Republicans’ privatization plan. It means billions upon billions of new investment dollars that will inflate stock prices and provide new revenue for capitalization of resources – what business does best. What business doesn’t do, however, is look at the long-term costs of their decisions.
In the long run, increased reliance on the stock market means Americans will be hit even harder if the stock market ever crashes – business will be hit harder too when the bubble finally bursts. That disclaimer on the bottom of every mutual fund advertisement you see isn’t a joke – “may lose value.”
Yes, Social Security has needed tweaking before to keep its finances stable, and it may need it now. But it’s no excuse to go and tear down what generations of Americans have built up as a legacy to their descendants.
Social Security was formed in the first place as a response to the Great Depression of the 1930s, a time when Americans experienced firsthand how the capitalist system can and does fail. President Franklin D. Roosevelt was propelled into office to find the solutions, and Social Security was one of them.
Now that the lessons of the Great Depression are fading from our national memory, Republicans see an opportunity to exploit young people to achieve their long-held political goal of undoing Roosevelt’s legacy. Don’t buy into it.
We can find other solutions to fix Social Security, such as raising the cap on payroll taxes and raising the retirement age. Such adjustments have been made before to keep America’s promise to its future generations, and there’s no reason we should give up on that promise now.
President Bush has relied up until now on young people to jump at the chance of higher returns in the stock market, hoping that we’ve forgotten the lessons of history. The reason? Just try and persuade someone over 50 that they shouldn’t get their Social Security check when they retire – all of it. I don’t know about you, but I’m looking forward to mine.
Omar Yacoubi may be reached at yacoubioa@vcu.edu.