Social Security Headfake

Call me crazy, but my experience in business, football, and marriage has taught me that the first step towards fixing a problem is actually addressing the problem. If your business is dealing with customer service issues, you might begin by looking for inefficiencies in operations, or addressing the training and staffing standards in your firm. If your team can’t run the ball, you might address your run scheme or work on blocking technique. If you are fighting with your wife, you would probably start by agreeing with her.

The point is, isolate the actual problem. At the moment, the Washington media, in concert with big finance (and big financial media) is working hard to convince Americans that their Congress needs to fix a very different problem from the actual problem facing our nation. And they are doing it for a very simple, very easy to understand reason; if they succeed, they will make billions.

Our nation carries, in nominal terms, a very large sovereign debt. In percentage terms however, our debt is somewhat less than it has been at various times in our history (to no ill effect). Our debt level is also substantially lower in percentage to GDP terms than Britain and Japan have carried for large stretches of their history. And the amount of interest we pay now to service our debt is near post-World War II lows. By itself, our debt is not an issue in the present, offering only the threat of ill effects over the long term. Contrasted with our debt is our unemployment and underemployment levels, which combined with the stagnant nature of median household income is a growing national tragedy.

The real problem is that real folks don’t have enough real jobs that pay real salaries. No one disagrees with this assessment, evidenced by the lack of commercials during the recent campaign focusing on our debt. The Very Serious People (thank you Dr. Krugman) knew that the real problem was jobs and economic growth, and we know they knew because of their campaign priorities. But once the election passed, they got back to their basic game-plan; the misdirection play. Ignore jobs, ignore even the real causes of debt, and go after Social Security.

That is right friends, even if you believe debt is the real problem, the Very Serious People are ignoring its actual causes. As a nation, we cut taxes (twice) and entered a war (under false pretenses). These two events caused our nation to go from surplus under President Clinton to annual deficits under President Bush…even before the onset of the Great Recession. And the Great Recession itself? That national tragedy caused the rest of our debt issues; lost jobs means lost tax revenues and increases in the need for expensive programs like unemployment, SNAP, and Medicaid.

The Great Recession preceded the debt, not the other way around. So whether you are speaking of jobs or debt being the greater problem, jobs are the universal solution. And even Republicans are now admitting that government spending creates and sustains core demand in our economy (otherwise they wouldn’t be talking about a “fiscal cliff,” now would they?)

Please note that Social Security isn’t a part of any of these discussions, because Social Security is currently solvent and projected to remain so for some decades into the future. Generations have paid into the system under a regressive tax (flat for normal working folks, with the wealthy paying a lower percentage than the working class). Generations are owed precisely the retirement security that the system was designed to provide. Never you mind the nonsense, the abject dishonesty, coming from the general direction of Welfare King and Goldman Sachs chair Lloyd Blankfein.

Yes, I wrote Welfare King, because Blankfein surely fits the description. His firm received $12.9 billion to bail it out from irresponsible investments in 2009. That represents a full quarter of all federal spending on food stamps during that fiscal year, food stamps that supported more than 33 million people in over 15 million households. Based on those numbers, one might assume that Goldman Sachs would be a champion for federal assistance, and they are. They champion federal assistance in the form of government contracts, risk transfers, and preferential tax treatments for those like them.

It is a despicable perversion of the old sergeant’s toast, “Here is to us, and those like us.”

But why are Wall Street honchos and other corporate types so motivated to attack Social Security and defend their tax treatments? It isn’t for the good of the country, of that we can all be sure. It is for the $800 billion in FICA taxes that aren’t made available to Wall Street vultures. If some or all of Social Security is privatized, the Blankein’s of the world would realize enormous revenues from the process, regardless of the level of security they provided to their customers.

Remember, money invested on Wall Street is not guaranteed, but (as evidenced by the 2008 crash and the bailouts that followed) the commissions of Wall Street traders are. Blankfein and others are attacking Social Security to create future earning opportunities for themselves, and they are attacking middle income tax rates to preserve their own low tax liabilities. In support of the scheme, the Goldman chairman and others are rolling out the old stock lines…”Social Security was never intended as retirement, people are living longer.”

And how do those lines compare with reality? Overall life expectancy has indeed increased by about 50% since Social Security was enacted. However, life expectancy at age 65 has only increased by about 33% since that time, and by less for women and non-whites (those of any background in poverty fare even worse). And as to the notion of what Social Security was created for, let’s allow Franklin Roosevelt to explain for us, as he championed and signed the law.

“Today, a hope of many years’ standing is in large part fulfilled. The civilization of the past hundred years, with its startling industrial changes, had tended more and more to make life insecure. Young people have come to wonder what will be there [sic] lot when they came to old age. The man with a job has wondered how long the job would last.

This social security measure gives at least some protection to 50 millions of our citizens who will reap direct benefits through unemployment compensation, through old-age pensions, and through increased services for the protection of children and the prevention of ill health.

We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-stricken old age.

This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.”-FDR August 1935

Beat the Recession…it is the real problem, and leave Social Security alone. If Lloyd Blankfein and his friends don’t have enough money already, tell him to build something concrete in the economy to profit from, if he even knows how.

The Rational Middle is listening…