Over the past two decades, the entire structure of retirement security, as well as other public and social programs, has come under increasing attack from corporations, White House administrations and the ultra-right. This assault has greatly increased under the administration of George W. Bush.
Retirement security starts with Social Security, but it also includes defined-benefit pensions (employer-based pension plans that pay a defined amount to workers upon retirement) and defined-contribution plans (401(k) and similar saving plans that pay based on worker and employer contributions). All of these plans face attack. Bush has now targeted Social Security — our nation’s best-run program, which has rescued millions from poverty — for destruction.
An economic catastrophe
Bush is sharpening his ax for the final blow. His call to privatize Social Security, in order to “save” it, is akin to the administration’s “Clean Air” Act, which actually allowed corporate polluters to further pollute with impunity. These corporate liars support Social Security the way a rope supports a hanging man.
Bush’s attempt to destroy Social Security can be either the first blow in a four-year pummeling of working people’s rights and economic standards — an economic catastrophe — or a Waterloo for the Bush administration. It will take a huge people’s movement, building on the coalition that came together during the 2004 election, to defeat Bush’s plan.
Social Security’s origins
President Franklin Delano Roosevelt signed Social Security, formally called the “Old Age, Survivors and Disability Insurance Program,” into law in 1935. It was one of the New Deal programs that were won by a militant new union movement — the Congress of Industrial Organizations (CIO) — and a huge movement for social and economic justice. At that time nearly 70 percent of American seniors faced poverty. Social Security established a nationwide insurance program, guaranteeing a base income for workers upon retirement, along with death benefits for widowed spouses and income for disabled workers to help them survive.
This tremendous government program has never missed a single payment and is now operating with a $2 trillion-plus surplus, a fact almost never reported by our corporate-controlled media. Senior poverty levels dropped to 34 percent in the 1960s, and stood at below 10 percent in 2000.
The Social Security Trust Fund is growing by about $150 billion a year. The fund’s own trustees estimate it will be solvent until 2041, while the Congressional Budget Office estimates solvency until 2052. That’s with the retirement of the baby boomers — those born post-World War II to 1962 — which will start around 2011.
In their report, “Social Security: The Phony Crisis,” economists Dean Baker and Mark Weisbrot expose the lies about the baby boomers’ impact on the Social Security Trust Fund. Privatization advocates argue the ratio of retirees compared to the number of younger workers will make for an unsustainable system. “But the decline in this ratio has actually been considerably steeper in the past. In 1955 there were 8.6 workers per retiree, and the decline to 3.3 [in 2000] did not precipitate any economic disaster,” they said.
Private accounts: a disaster
Far from “saving” Social Security, the setting up of Bush’s private accounts would be astronomically expensive and a huge drag on the trust fund. Setting up private accounts would cost more than $1.5 trillion over the first decade. To pay for this massive expense, monies would either have to be taken from the trust fund, greatly weakening it, or be obtained through further government borrowing, raising the already gargantuan federal deficit created by this administration.
Turning people’s retirement security over to Wall Street would be a horrible gamble. Millions could lose everything with just a small blip in the stock market.
The idea that private financiers would handle workers’ collective retirement money more efficiently than the federal government is part of the private-is-better-than-public “Big Lie.” The truth is that while Social Security has never missed a payment in 70 years of its existence, administrative costs at that agency are under 1 percent. Most conservative estimates state that financiers running private accounts would use at least 15 percent of revenues in administration costs.
Can you get rich?
Bush and proponents of private accounts play up the possibility of some folks getting rich off private accounts. Brilliant at dividing people, these thieves are playing younger against older workers. In reality, nobody would ever get rich from private accounts. High-risk, high return investments are extremely expensive to manage. Young workers drawn into this Wall-Street-manufactured fantasy would actually destroy any possibility of economic security for themselves and their families later in life.
African Americans, other minorities and women
African Americans, other minorities and women would be much harder hit by any plan to privatize Social Security. African Americans — 12 percent of the population — are almost 18 percent of those receiving disability benefits, and Black children represent 23 percent of all children receiving survivor benefits.
Women, Latinos and African Americans — who all face discrimination — generally earn less, face higher rates of unemployment and disability, and are less likely to have savings or other retirement income, and are all more dependent on Social Security insurance.
Private accounts would not have disability coverage. Workers who became disabled with those accounts could potentially be thrown to the wolves. Furthermore, approximately one-third of Social Security benefits are paid out to disabled workers, widowed spouses and dependent children. Privatization would endanger these current benefits by undermining the Social Security Trust Fund.
Privatizing Social Security would destroy the last line of defense for a great many working folks against the brutal ravages of raw capitalism. Bush and his corporate ultra-right buddies, who never supported Social Security in the first place, now tell us to trust them to “save” it. As we examine the facts it becomes clear that they plan to “save” Social Security like the general in Vietnam who spoke of having to “destroy the village to save it.”
Any problem with financing for Social Security, in 36 or 47 years, could easily be taken care of by rolling back a quarter of Bush’s tax cuts to the rich for only one year. Currently Social Security tax (FICA) is paid on income up to $89,900. So Bill Gates and I pay the same FICA tax. The payroll tax cap should be abolished, which would raise more money for the fund and increase Social Security benefits as well.
What about other pension plans?
Defined-benefit pensions, another part of retirement security, were also gains won by the newly organized industrial unions in the 1930s. The Wagner Act, giving workers the legal right to organize, was passed in 1935 and the new unions achieved success in organizing much of the country’s industries. Pension plans were part of the organizing gains.
While this movement began in the 1930s, the establishment of pension plans really didn’t take off until the 1940s and the end of World War II. From that time until the past decade, many workers were covered by pensions and their families were able to enjoy a level of economic security.
However, large corporations have strongly pushed to dump defined-benefit pensions, forcing workers into 401(k) savings plans. Enron workers had their money in these types of corporate-controlled saving plans, and they lost their life savings when that company collapsed a few years ago.
In 1979, some type of defined benefit pension plan covered 71 percent of workers. That figure dropped to 18 percent by 2000. Sixty-nine percent of unionized workers today are covered by such pensions, as opposed to only 12 percent of non-unionized workers. Union membership, however, has fallen to 12 percent, the lowest percentage of unionization in our nation since prior to the formation of the CIO.
Pension Benefit Guarantee Corporation
In 1974, legislation was passed to guarantee workers would not lose their pensions from business bankruptcies. The drive to pass it came out of the disastrous bankruptcy of Studebaker Corp. in 1964, which resulted in thousands of autoworkers losing their pensions. The Pension Benefit Guarantee Corporation was set up as a federal corporation to insure workers’ pensions in case of corporate bankruptcies. PBGC funding comes from corporations that have workers covered by defined benefit pension plans. The PBGC is threatened, too, due in the first place to the declining number of companies with workers covered by real pensions, and thus, less funds being paid into the PBGC. In 1985, 114,396 company pension plans were insured by the PBGC. By 2002 that number had fallen to 32,321, a drop of over 73 percent in only 17 years. Today less than 30,000 plans are covered.
Furthermore, corporations have adopted a policy of failing to fully fund their pensions, creating a major crisis. This crisis began to be the crap that hit the fan around five years ago, when a wave of corporate bankruptcies hit the steel industry. Nearly 50 companies went under, creating a massive crisis for the PBGC.
When Republic Steel (the company I worked for) filed for bankruptcy in 2002, the PBGC reported that they were operating with an $80 billion surplus. Today that has been reversed, with the PBGC now reporting that they have more than a $20 billion deficit.
Companies that were legally responsible for funding their pension plans have adopted a policy of brazenly refusing to fully fund them. Under PBGC rules, companies can claim their policies are fully funded when, in fact, companies have only funded them to an 85 percent level.
As bad as this is, companies are refusing to even fund their plans to that level. Bethlehem Steel, for example, was reporting its plan was 85 percent funded when it went bankrupt last year, but the PBGC found it only 45 percent funded when it took over that plan. The Republican-controlled Congress last year passed legislation that lowers the level that companies can pay into their pension plans and still be legally “fully funded” under PBGC rules.
My union, the United Steel Workers of America, fought like hell to win back our pensions. We organized rallies, lobbied, filed and won a federal lawsuit. However, the Bush-run PBGC appealed that decision to the 6th Circuit Court in Cincinnati, where a three-judge panel reversed the ruling, stating that we had “no expectation of receiving our pensions.” That panel was made up of two Bush appointees and an ancient Ford appointee who fell asleep during the arguments. This ruling has forced thousands of steelworkers who’d worked their entire lives expecting to have some level of security into stark poverty. The Republic case was the first time the PBGC had refused to pay workers’ pensions when they’d taken over a plan. This outright refusal to pay certain pensions by the PBGC has now been repeated numerous times with other plans taken over by that agency.
Remember now, these are the same folks that are telling us that they want to “save” Social Security.
It takes a fight to win
Up until this time the fight to defend our pensions and retirement security has been localized, generally one union and one fight at a time. Steelworkers, miners, airline workers and others have conducted heroic and militant actions against this massive corporate attack on our pensions, but have not been coordinated. The fight to defend and improve Social Security must, if it is to be successful, become the struggle of all the people with the labor movement and retiree organizations in the lead. But everyone, youth as well as seniors, women, minorities and all American people must understand the deep stake they have in winning this struggle.
Unions, churches, community, veteran’s and women’s organizations, as well as seniors and retiree organizations can be mobilized to call for no privatization of Social Security. Through community forums, teach-ins, rallies and letter-writing campaigns, including letters to the editor, a grassroots battle can be waged. Coalitions can organize local delegations to flood Congressional offices, demanding that they oppose Bush’s privatization scheme.
The Alliance of Retired Americans is calling for a massive coordinated campaign to defeat privatization, starting with a “Campaign for Truth” to argue the facts on the dangers of privatization in the media and public. The ARA also plans a mass national lobby day and march in Washington, D.C.
This is the fight for the future of our nation. It’s time to draw the line in the sand.
Bruce Bostick (bruce@imaginenet.net) is a 30-year steelworker in Ohio, now retired, who had his pension stolen.
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