Stabilizing Social Security? Not This Way!

by P.A. Stahl

Stabilizing Social Security by Jeffrey R. Fisher, is about the sort of tract I would expect from an Ayn Rand acolyte. Unfortunately, mostly what Fisher does is demonstrate little if any awareness of the altered economic conditions which make Social Security absolutely essential - and moreover - I'd warrant at an even earlier age (allowing full benefits by age 62, rather than 65 1/2).

Socialist-Marxist drivel? Economic heresy? Hell no! But based on the fact of how our economic landscape, especially in respect of job availability for those over 50, has changed.

Let's take a look at some of Fisher's remarks, and then I will provide counter arguments to them. He writes (p. 6):

"Much has changed in longevity and health, but social security, being bureaucratic and politicized, has not kept pace"

In fact Social Security has kept pace (or nearly so) with most of the worker-hostile economic changes. Not wanting to make this missive overly long, may I refer interested readers (especially Mr. Fisher) to the book by former Business Week editor David Wolman, and Anne Colamosca: The Judas Economy: The Triumph of Capital and the Betrayal of Work? The book superbly and masterfully documents the immediate past history of how the economy was subverted by capital from the Reagan era through at least 1997. Most of this accrued via corporate over-investment in profit-making and using a cynical model whereby productivity was enhanced by downsizing workers and having the remainder do the work of those that had been ditched, plus themselves. This then caused share prices on Wall Street to soar (the perfect format and examples being embodied by "Chainsaw Al" Dunlap, e.g. with Sunbeam.

Most of this was before the era of globalization, wherein companies like Cisco and GE could dispatch jobs by the millions overseas, including techie jobs (since they could make more profits by paying about half the per hour wages, and no benefits). Indeed, with the dawn of the globalization era, via NAFTA, the World Trade Organization and other agents, it became much easier to offload American jobs overseas to earn higher profits.

Now, combine that with a little known Fortune 500 White Paper issued in 1996: On the Need to Make Older Workers Redundant, and one basically had the template already in place for mass loss of jobs for all those over 50. Oh, except for being a WalMart Greeter or some such fare, from which no secure financial foundation could be built, say in a putative retirement!

My point here? Fisher has totally ignored how the vast majority of older workers (yes, there will always be a few exceptions) have been systematically rendered redundant by an out of control cowboy capitalist system that depends for its profits on overseas labor, and also productivity via job elimination.

Meanwhile, in a more stark display of cynicism and outright cruelty, the Sept-Oct. Mother Jones in an expose article 'All Work and No Pay', documented how corporations have not only sliced health benefits for older workers, but increased the pace of work so many can barely keep up and must call it quits after some disability sets in. These workers then naturally will want to go on Social security disability as soon as possible.

Now, logically, if one expects all this to be valid, it should be reflected in economic statistics. There are two propositions to be tested, at least indirectly:

Proposition (1): The offloading of millions of jobs overseas has caused a hollowing out effect on American workers' lives leaving many with less pay, fewer benefits and much more debt. (And remember, no longer able to use their homes as ATMs.)

Proposition (2): The yen to increase productivity by eliminating workers (especially older ones who garner higher pay and benefits) has led to increased income inequality.

Note also that in both case, the unemployment rate would be expected to increase, as median wages stagnate.

These are validated by the fact that the Gini coefficient for the U.S. is now 0.468 or what one finds in Mexico and the Philippines. (This is cited in a Wall Street Journal article, Sept. 12, p. A1 on the recalibrated marketing strategies now used to compensate for lower spending by a decapitated Middle class.)

Note: the Gini index or coefficient ranges from 0 (perfect equality, or everyone earns the same amount) to 1 (perfect inequality, or one person earns all income). Gini indices in the 0.4-0.5 range generally indicate a lopsided distribution of wealth where 10% of the populace controls 90% of the wealth or assets of nation.

I submit all of these in concert invalidate Fisher's claim that the Social Security full benefits age merits an immediate legislative gambit whereby a 20-year age shift is applied over the next 40 years. Not when the economic barometer actually shows labor conditions worsening even further, and even more Americans doing without health care!

This is the next thing, Fisher's claim about advancing life expectancy based on better health outcomes. But I would argue that when 47 million remain without health insurance this is pie in the sky abstraction. Older people especially, will have to bear many more costs if the current austerity mindset consolidates, and that means less health support, more out of pocket payouts - doubtless coupled with no Social Security COLAs to compensate. The expected outcome? Life expectancy probably decreasing to 61 or even 60 by 2040, as Medicare emerges as barely a shadow of its former self.

Of course, having said all this there are fixes which can genuinely stabilize Social Security. One of the first and best is to enforce a little known 1991 law called "the Budget Enforcement Act" which had actually prescribed a genuine lockbox for Social Security – precluding avaricious politicos from raiding it (say to pay for pork, or for wars and occupations, or simply making the deficit appear lower on paper) and replacing the monies with IOUs. That alone would save up to $100b a year.

Another easy fix would be to simply increase the payroll tax from its current threshold of about $106,000 to about $250,000. That single move alone, combined with a 'hands off' policy would see Social Security able to deliver full benefits through 2047.

Social Security privatization, which proposal Fisher also advances has two knocks against it:

1) Social Security was never designed as an investment vehicle but rather as a financial backstop, or at least a minimal fallback security income when a person may have lost all else, say his 401k to stock market collapse or correction. (Which in itself provides a cautionary tale against putting S.S. money in the stock market!)

2) Nearly every privatization scheme requires carving out its funds (usually up to 1-2%) FROM payroll taxes, which are the very basis for Social Security income. Thus, any form of privatization which does this, is at the expense of Social Security's stability.

Younger adults like Fisher will have the same safety net, but not using his prescription, which is about what I'd expect from a person who's never taken a serious stock market loss (50% or more of investments) or experienced a health care crisis or retrenchment of benefits.

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