There is no crisis…

Well, I seem to have gotten my crank back on. Gee, I wonder why that is? Could it be because we’re about to re-inaugerate the Chimp-In-Chief to a second term as President?

Ya think?

What’s really gotten under my skin this week is all the flat out bullshit the Bush Administration is flinging about their plan to “reform” the Social Security system. According to Dubya himself the system will collapse and be insolvent in 2018. That’s funny. The admittedly alarmist trustees of the Social Security Administration in their own panicky estimate have claimed that the system will have to tap its trust fund (that’s money that the SSA has held onto in various securities, mostly long-term bonds, that it currently takes in in the form of taxes assessed in workers’ paychecks but does not need in order to pay benefits to those currently elligible) in 2042. According to the Congressional Budget Office the trust fund will actually not need to be tapped until 2052.

In fact, if we do absolutely nothing to the Social Security system – no increases in payroll taxes, no modifications in benefit levels – and leave it as it is today the only impact will be a need to reduce benefits in 2052 by a bit less than 20%. But this passes for a crisis in the world of the Bush Administration. There is no crisis folks.

What the Administration is proposing, with Dick Cheney leading the charge, is re-routing over 90% of the taxes collected by the SSA to private investment accounts controlled by individual workers. Let me spell this out really slowly and explain what this change represents. Currently when your SS taxes are taken out of your paycheck they go to one of two places – they either pay benefits to elligible citizens or are placed into the Trust managed by the SSA. At present the SSA takes in quite a bit more money than it pays out in benefits, so most of the money collected goes into the trust. The trust is held in the form of short and long-term Treasury Bonds that are secured by the US Government. One thing about this system, unless the US goes into major default on its debts to independent and foreign national banks the bonds held by the SSA Trust are guaranteed to be paid when cashed in. That means your Social Security benefits are guaranteed. If the Bush Administration gets their way over 90% of the money collected by the SSA will go wherever you and I see fit to put it. What the Administration is hoping is that we’ll put it into the stock market, and that is likely what the vast majority will do.

Let’s let that sink in for a moment.

Ok, now does anyone remember the collapse of the stock market in 2001? Let’s say that the proposed Administration system had been in place then. That would mean that your Social Security money would have largely gone up in a puff of smoke and it wouldn’t be coming back. It would just be gone. One thing that any economist or investor will tell you about the stock market is that it’s cyclical. The market goes up. Yes indeed it does. But it also goes down. And with each oscilation of the market down people lose money. Generally speaking, unless you actively manage your stock portfolio with some skill you are far more likely to lose money in the stock market than you are to make money. Another way to put it – playing the market is really just high stakes gambling, and all gamblers know that the odds in Vegas are a lot better than the odds on Wall Street.

Another reason why privatization of Social Security is a dreadful idea – it will massively increase the national debt. In order to make the shift from the current system to the one proposed by the Administration the US Government will have to borrow billions of dollars in what the Administration are calling transitional funds. Still another reason why this is a bad idea – one of the major factors precipitating the collapse of the Argentine economy in the 1990s was their governments conversion of their Social Security system to a similar privatized model. The government of Argentina incurred so much debt load in their transition to privatized retirement funding that they went into massive default. Like Argentina, the US is already incredibly debt heavy. The Bush Administration’s proposal for privatizing Social Security has a great deal of potential to make continued support for US borrowing look greatly unappealing to the foreign national banks (primarily the Chinese state bank) who are currently floating most of our national debt.

So, who makes out if the Administration gets their way? Mostly investment brokerages, the NASDAQ, the NYSE and major corporations looking to expand their capital via stock sales. In other words, people who are already absurdly wealthy will get wealthier, while millions of working schmoes will lose their retirement money in the stock market. Sound like a good idea?

Folks, this is a bad idea. Repeat after me – there is no Social Security crisis. The Bush Administration is bullshitting us, again.

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