Bush backers made a sucker’s bet
   by  Gene Lyons      December 22, 2004

In making President Bush its "Person of the Year," Time gushed that he
had successfully "reframed reality to match his design." Ponder that phrase.
A cynic might think it a backhanded way of calling him a particularly
accomplished liar. Indeed, Bush prevailed in November largely because
many Americans simply cannot believe that their president would deliberately
mislead them about matters of life and death. Consider, however, Bush’s
doomsday pronouncements about the impending bankruptcy of Social Security.
They’re sheer fiction, contrived to conceal this administration’s own fiscal
recklessness—the combination of tax cuts for the wealthy and runaway
spending that has increased federal outlays some 29 percent since his 2001
inauguration. After pledging during the 2000 campaign to set aside $2.6 trillion of
the projected surplus in a Social Security "lockbox," Bush has, instead, produced
swelling deficits. Now he promises strict "fiscal discipline." Do not hold your breath.

Here’s the real problem: Over the past two decades, ever since a commission led
by Alan Greenspan convinced the Reagan administration to raise payroll taxes to
fund the retirement of the so called Baby Boom generation, Republican and
Democratic administrations alike have "borrowed" the proceeds to finance the
year-to-year operations of the U.S. government. Instead of cash reserves, the
Social Security Trust Fund, roughly $1.5 trillion to date, consists of "special issue"
Treasury bonds pledging repayment with interest whenever the money is needed
to pay Social Security benefits.

Under current projections, that’s supposed to start happening in 2018, when the
excess payroll taxes paid by Baby Boomers over 35 years to fund their own
retirement will be needed. By then, the trust fund should be worth approximately
$3 trillion—enough to keep the system solvent for at least another 30 years with
no benefit adjustments whatsoever.

But here’s the problem, according to Allen W. Smith, author of "The Looting of
Social Security":" Instead of investing the Social Security surpluses in regular
marketable Treasury bonds that could be cashed in whenever additional money
was needed for benefits, the government simply spent the money, leaving nothing
to invest. The government IOUs held by the trust fund are not at all like regular
marketable Treasury bonds.... [T] hey are nothing more than accounting entries
that tell us how much the government owes to the Social Security fund. They
couldn’t be sold to private investors even at a penny on the dollar because they
have absolutely no cash value. "

Explaining the need for Bush’s proposed" reforms, "White House spokesman
Dan Bartlett recently put it this way:" After 2018, the system goes from the black
to the red. We have payments going out that we can’t afford to make. "

Americans have grown used to hearing such pronouncements from authoritative
-sounding" experts" from tycoon-funded, right-wing Washington "think tanks"
such as the American Enterprise Institute, the Heritage Foundation and the Cato
Institute. Indeed, so many have come to believe them, the Los Angeles Times
reports, that a "1994 survey found that more people between the ages of 18
and 34 believed in UFOs than believed Social Security would exist by the time
they retired."

But here’s what Bartlett, Bush and the think-tank spokesmen actually mean when
they say Social Security’s going broke: They mean that the trust fund has been
looted fair and square, that everybody who’s been paying those increased payroll
taxes since 1983 has been successfully swindled and that the U.S. government
need not honor those special issue Treasury bonds. As Smith writes, it’s a financial
"crime against the American public that makes Enron pale in comparison."

You may be interested to learn, courtesy of David Sarasohn of The
Oregonian, that each and every special-issue bond in the Social Security
Trust Fund bears the following inscription: "The bond is supported by
the full faith and credit of the United States, and the United States is
pledged to the payment of the bond with respect to both principal and
interest." Under our brave, new Republican dispensation, the "full faith
and credit of the United States" could prove a meaningless phrase.
Treasury bonds held by Richard Mellon Scaife, Japanese banks and the
Chinese government must, of course, be honored, lest the international
monetary system be plunged into chaos. But it’s OK to drain Social
Security to pay for Bush’s multimillionaire tax cuts instead of honoring
solemn obligations made to generations of defrauded American workers and
their families. Privatization, then, is partly an elaborate shell game
to distract public attention, partly a utopian scheme dreamed up by the
same geniuses who gave us the Laffer Curve, S&L reform and the "Dow
36,000" among other economically destructive "free-market" fantasies.
As for the deluded peasants whose future has been stolen, they simply
made a sucker’s bet and have only themselves to blame.

• Free-lance columnist Gene Lyons is a Little Rock author and recipient
of the National Magazine Award.


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