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 socalled 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 "specialissue" 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 Timesreports, 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 specialissue 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.