U.S. Social Security privatization

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U.S. Social Security privatization is at the top of the conservative agenda, following the reelection of George W. Bush in the 2004 presidential election. Financial institutions which stand to be the biggest beneficiaries of this plan were the largest contributors to the re-election coffers. The President continues to do the bidding of his benefactors, overtly and unashamedly. Nothing could be more plain and simple.

Central to the campaign is an effort to persuade US voters that the existing Social Security system is 'in crisis' [1]. Meanwhile, Bush's allies at Fox News and USANext have been attacking AARP, which opposes privatization of the system [2]. AARP has been in the administration's sights since at least early 2004, when an organization with a misleadingly similar acronym, the Alliance for Retirement Prosperity or ARP, was launched by Republican stalwarts such as Jack Kemp and Dick Armey [3].

During his January 16, 2005, interview with the Washington Post, President George W. Bush corrected the reporter's use of the term "privatization plan", insisting on the phrase "personal savings accounts." Privatization is no longer the term used by Republicans to describe the plan, due to its poor performance in polls and focus groups. [4] Another euphemism was deployed by Karl Rove during a February 9, 2005, interview with Hannity & Colmes on Fox News. According to the News Hounds blog, Mr. Rove spoke of modernizing Social Security. [5]

Rove's favorite euphemism was also used in a memo sent to the Social Security Administration's regional and public relations directors in February 2004. It stated that "Modernization must include individually controlled, voluntary personal retirement accounts." Also in the memo were talking points on the "long-term challenges facing Social Security." Critics said the memo was evidence of the Bush administration instructing a government agency to promote a certain political agenda. [6]

Download the Social Security Administration's 2005 communications plan - 592 kb PDF file.

Status Reports

Beginning Monday, January 18, 2005, a new installment of the "Social Security Reporting Review" (SSRR) by the Center for Economic and Policy Review will appear online every Monday. The SSRR will only chronicle stories concerning Social Security.

Tracking Where Members of Congress Stand: the Fainthearted Faction and the Conscience Caucus

Kevin Drum at The Washington Monthly related January 16, 2005, that "For the past few weeks Josh Marshall has been industriously collecting names of congress critters who are members of what he calls the 'Fainthearted Faction'—Democrats who are saying nice things about the president's Social Security privatization plan—and the 'Conscience Caucus'—Republicans who are bucking the party line and refusing to go along with it. Click the links to see who the current members are," he writes.

The Political Debate

Privatization Advocacy

  • 9 Jan 05: "Personal accounts, funded by allowing individuals to maintain control of a portion of their payroll taxes, wouldn't help much, as even advocates acknowledge 'The solutions we're talking about are for the more distant future,' said David John of the conservative Heritage Foundation. 'It takes at least 25 years for an account to reach a size where it could provide a significant amount of retirement income.'" [7].
  • 18 Jan 05: "Vice President Dick Cheney is playing a potentially pivotal role in shaping the Bush administration's ambitious domestic agenda, supporting larger personal investment accounts for Social Security than many other Republicans and helping gauge how the White House should proceed on Capitol Hill, administration officials and associates of Mr. Cheney say." [8]

Privatization Opposition

  • 6 Jan 05: "What interesting timing that FOX News should pick yesterday to attack AARP. What a wild coincidence that this should happen just as George Bush is getting ready to unveil the details of privatizing portions of Social Security, a scheme that AARP opposes. You know right away that there's something suspicious about AARP from the title of the article on FOXNews.com and the accompanying video available on the web, AARP Rakes in Cash." [9]
  • 9 Jan 05: "Later on, the bonds themselves will have to be paid off. This will put a growing strain on the federal budget. While that's undesirable, it's precisely the scenario envisioned by architects of the last major Social Security bailout, enacted by Congress in 1983. 'Yes, the rest of the government is going to have to come up with tax revenue to cover Social Security obligations during this period,' said Bernard Wasow, senior fellow at the Century Foundation, a liberal think tank. 'But the reason all these bonds exist is that for the last 20 years—and the next 14—people have been paying and will continue to pay more in payroll taxes than is necessary to pay benefits.'" [10]
  • 27 Jan 05: The Hill reports, "Automated callers are phoning seniors in at least a dozen Republican congressional districts across the country telling them their representative favors 'privatizing Social Security.'" The calls are targeting "Republican members with high concentrations of senior citizens" in their districts, especially in areas with a strong Democratic presence. " The calls warn, "This plan would cost taxpayers two trillion dollars," and would "decrease benefit to retirees by 47 percent." They assert, "The Social Security trust fund should be in a lock box, not a Wall Street slot machine." No group takes responsibility for the calls, which are decried as "scare tactics" by Republicans. [11]

Privatization Centrists

  • 12 Jan 05: Geoff Earle reports for The Hill, however, that the "Centrists steer clear of Social Security plans": "'There is a sense that no one really wants to stick their head out at this point in time for fear they're going to have their head cut off,' one Senate Republican aide said."

Lobbying Campaigns

Perception Management

  • 4 Feb 05: "Some Barred From Bush's North Dakota Speech": A list of 42 people in Fargo, North Dakota, including "a city commissioner, a liberal radio producer, a deputy Democratic campaign manager and a number of university professors," were put on a "do not enter" list for an event with President Bush, promoting Social Security. Eventually the list, which was "supplied to workers at two ticket distribution sites," was repudiated and at least some people on it were able to attend. The White House distanced itself from the list, saying it must have come from local volunteers.
  • 4 Feb 05: "RNC Asks Television Stations To Stop Running False MoveOn.org Advertisement": Republican National Committee deputy counsel Michael Bayes, in a letter to television stations carrying an ad from the liberal group MoveOn.org that opposed Bush's privatization plan, said the ad "falsely and maliciously" misrepresents the Bush plan. The letter ended, "As an FCC licensee, you have a responsibility to exercise independent editorial judgment to oversee and protect the integrity of the American marketplace of ideas, and to avoid broadcasting deliberate misrepresentations of the facts. Such obligations must be taken seriously and I urge you to decline to broadcast this advertisement. This letter places you on notice that the information contained in the above-cited advertisement is false and misleading. Your station should act responsibly and refrain from airing this advertisement." MoveOn.org countered with a statement of its own, providing documentation for the facts in its ad.
  • 28 Feb 05: "Social Security Admin. Altered Communications Strategy to Undermine Public Confidence": The U.S. House of Representatives Committee on Government Reform Minority Office (Democratic staff) released a report that concluded, based on an analysis of more than 4,000 pages of "documents relating to the communications strategy of the Social Security Administration," that the SSA "has markedly changed its communications to the public over the last four years." Moreover, "while estimates of Social Security's long-term solvency have improved ... the [SSA's] rhetoric has moved in the opposite direction." Previously described as a program that keeps seniors "out of poverty" and is in "no immediate crisis," Social Security is now portrayed as an "unsustainable," "underfinanced" program that "must change." The differences "reflect a growing politicization of the [SSA]" and raise "questions about [its] political independence," states the report. Download the "Politicization of the Social Security Administration" report - 1 MB PDF file.
  • 2 March 05: Bloomberg News reports that Deputy White House Chief of Staff Karl Rove met with business lobbyists to coordinate on pushing Bush's Social Security plan. "The White House is running this as if it's a political campaign," Stephen Moore, president of the Washington-based Free Enterprise Fund, told Bloomberg. "There are regular meetings the White House has with all the groups to make sure everyone is singing from the same hymnal."[12] At a February 24 meeting, "which at least three attendees described as a 'rah-rah' cheerleading session, Rove, [Director of the National Economic Council Al] Hubbard and Barry Jackson, a special assistant to the president who is handling Social Security reform for the White House, made brief remarks about the state of the fight and fielded questions from the invited guests," The Hill reported. "Attendees included representatives from the 60-Plus Association, a conservative advocacy group for seniors, and CoMPASS, the K Street coalition pushing for Social Security reform, as well as America's Community Bankers, the National Retail Federation and the Mortgage Bankers Association."[13]

Fact Checking

  • 17 Jan 05: "Explaining how both the 'Social Security crisis' and the 'privatization solution' rely on faulty math misses the point of the president's plan entirely. Like supply-side tax cuts, Social Security reform is a subject on which conservatives prize philosophy—or, if you prefer, ideology—over arithmetic.
"The confusion over the nature of the debate is intentional. The Bush administration has linked two reforms—private accounts and benefit cuts—that have nothing to do with each other. Benefit cuts are the administration's preferred solution to Social Security's long-term financing imbalance. (Democrats prefer a mixture of benefit cuts and tax hikes.) Private accounts have nothing to do with Social Security's actuarial problems, except to the extent that they make them worse. White House aide Peter Wehner conceded as much in his leaked memo on Social Security. Pushing investment accounts without benefit cuts would mean 'making no effort to address [the system's] fundamental structural problem, Wehner wrote."
"Private accounts have different virtues, Wehner explained. 'Our goal is to provide a path to greater opportunity, more freedom, and more control for individuals over their own lives. That is what the personal account debate is fundamentally about.' In other words, it's a philosophical debate about the role of government, not a mathematical debate about how to make Social Security's outflows match its inflows." [14]
  • 18 Jan 05: "Last week Andrew Biggs, the associate commissioner for retirement policy at the Social Security Administration, appeared with Mr. Bush at a campaign-style event to promote privatization. There was a time when it would have been considered inappropriate for a civil servant to play such a blatantly political role. But then there was a time when it would have been considered inappropriate to appoint a professional advocate like Mr. Biggs, the former assistant director of the Cato Institute's Project on Social Security Privatization, to such a position in the first place.
"Sure enough, The New York Times reports that under Mr. Biggs's direction, employees of the Social Security Administration are being forced to disseminate dire warnings about the system's finances - warnings that the employees say are exaggerated.
"Still, there are two reasons why the selling of Social Security privatization shouldn't be another slam dunk.
"One is that we're not talking about secret intelligence; the media, if they do their job, can check out the numbers and see that they don't match what Mr. Bush is saying. (A good starting point is Roger Lowenstein's superb survey in The Times Magazine last Sunday.)
"The other is that we've been here before. Fool me once ... " [15]
  • Congressional Statistics, December 2003 (released June 2004). Fact sheets with Old-Age, Survivors, and Disability Insurance (OASDI) and Supplemental Security Income (SSI) data arranged by state and region. There is one fact sheet for each state, the District of Columbia, American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands. SocialSecurity.gov.

Debated Issues

Life Expectancy

"When the federal government assesses the long-term financial problems of Social Security, it assumes that increases in life expectancy will be slow and measured. But many population experts say they believe that Americans' life expectancy will increase rapidly in the 21st century, making the program's financial problems even worse."
"Life expectancy at birth increased by 30 years in the last century, and many independent demographers, citing the promise of biomedical research and the experience of some other industrialized countries, predict significant increases in this century. The Social Security Administration foresees a much slower rise."
"'Life expectancy will make a very big difference in the fiscal viability of Social Security, but the agency's projections of longevity appear too conservative,' said Prof. Samuel H. Preston of the University of Pennsylvania, one of the nation's leading demographers.
"Dr. Preston said the agency assumed that 'past advances in life expectancy are unrepeatable, even though the medical research establishment is routinely producing important breakthroughs that reduce the incidence or fatality of a variety of diseases.'
"Richard M. Suzman, associate director of the National Institute on Aging, a unit of the National Institutes of Health, said: 'There is a long history of government actuaries and statisticians underestimating future gains in life expectancy. The United States is unfortunately well below the outer limits of life expectancy. Other countries are doing much better. That gives us an indication of the potential room for improvement.'
"Tables published by the government's National Center for Health Statistics show that life expectancy at birth was 47.3 years in 1900, rose to 68.2 by 1950 and reached 77.3 in 2002. The latest annual report of the Social Security trustees projects that life expectancy will increase just six years in the next seven decades, to 83 in 2075. A separate set of projections, by the Census Bureau, shows more rapid growth.
"Social Security says male life expectancy at birth will be 81.2 years in 2075. The Census Bureau, using different methods and assumptions, says that level will be reached much earlier, in 2050."

Social Security is in "Crisis" ... or is it?

  • 16 Jan 05: Roger Lowenstein, in the New York Times Sunday Magazine, writes in "A Question of Numbers" that the "campaign is potentially self-fulfilling: persuade enough people that Social Security is going bankrupt, and it will lose public support. Then Congress will be forced to act. And thanks to such unceasing alarums, many, and perhaps most, people today think the program is in serious financial trouble."
Lowenstein questions, however, "But is it? After Bush's re-election, I carefully read the 225-page annual report of the Social Security trustees. I also talked to actuaries and economists, inside and outside the agency, who are expert in the peculiar science of long-term Social Security forecasting. The actuarial view is that the system is probably in need of a small adjustment of the sort that Congress has approved in the past. But there is a strong argument, which the agency acknowledges as a possibility, that the system is solvent as is."
  • There is No Crisis web site: "Social Security is America's promise that those who work hard and play by the rules will retire with dignity. Even the most pessimistic of economists agree it will remain solvent for decades. There is no crisis."


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