Reply #7: Yeah, I guess I do understand [View All]

[Martin Eden]

The "loan" is the government borrowing to fund the transition costs. Money diverted to private accounts creates a shortfall in funding for benefits to older citizens who aren't particpating in privatization. If these benefits are not to be cut, where are the funds supposed to come from?

Since the privatization scheme is related to Social Security, will the funds be drawn from the trust fund, hastening its depletion? If not, will the cost simply be added to the deficit?

The fact is that privatization does nothing to solve the financial shortfall that is expected in 2042 or 2052, unless the transition costs are NOT drawn from the trust fund and IF SS benefits are reduced for those with private accounts by a percentage greater than was diverted to their accounts. This reduction would be palatable if the returns from investments minus fees are significantly greater than the return from SS.

Even if the private investments perform well and SS benefits can be reduced commensurately (a big IF), this savings would not likely come close to offsetting the initial transition costs with interest on that debt.

SS itself can be sustained in its current form indefinitely with slight adjustments now, such as indexing benefits to inflation rather than wages and raising the cap on taxable income. The REAL problem is the budget deficits created by the Bush tax cuts and war of choice in Iraq. The SS trust fund was used to finance these policies and if the money owed to the trust fund is to be repaid, it will have to come from general revenues or simply be added to the deficit.

This definitely presents a problem, but the privatization plan only exacerbates it -- which was probably the plan all along.

Most young people are already of the opinion that SS will not be there for them when they retire, so naturally private accounts make sense to them. The mindset is being established that SS is unsustainable, that the funds will run out in 2018 when benefit payments begin to exceed ioncome from payroll taxes, and that the trust fund itself is little more than an accounting gimmick consisting of worthless IOU's.

This is not a recipe for saving SS, it is a scheme for destroying it. The fiscal pain of the transition costs will blamed on the SS system rather than on the scheme, and the insolvency -- combined the greater liabilities of the Medicare system -- will be the final death knell of FDR's New Deal and LBJ's Great Society.

This isn't about about saving SS or even about providing financial security for retirees -- it's about achieving the long term ideological goals of "conservative" hardliners who long for the unfettered capitalism of 100 years ago that produced vast fortunes for wealthy capitalists and deplorable living standards for workers. Carl Rove's model of government is the McKinley administration of that era.

The bonus for them is that it is all being made possible by the deficits caused by the tax cuts purchased with their campaign contributions. The real pain will be felt by working Americans who would have benefitted from the entitlement programs that are being bankrupted. The SS trust fund was built up by decades of increased payroll taxes, which are essentially being transferred to the wealthiest Americans in the form of tax cuts. It is Robin Hood in reverse on a grand scale, with the Robber-In-Chief campaigning around the country to convince the poor it's for their own good.

Does the Democratic Party have what it takes to expose this scheme for what it really is and make a stand against the unfettered greed that is in the process of stealing our future?