I was taught in AP U.S. History that since the presidency of Ronald Reagan, Republicans have developed domestic policy around a simple three-word maxim: screw the poor, or STP. We’ve seen the STP policy in the concept of trickle-down economics, attempts to cut programs like Head Start, and George W. Bush’s tax cuts. Now, with the president spearheading efforts in Social Security reform, STP has again reared its ugly head.
President Bush once said, “By making the right choices, we can make the right choice for our future.” How right he is. While the president may be incapable of forming a sentence that doesn’t induce neural trauma, two weeks ago he actually articulated an intelligent choice for the future. The trouble, though, is that it was about Social Security — an issue specifically designed to bore the crap out of college students, and the sole cause of my monthlong hiatus from The New York Times editorial page.
Yet, in an effort to learn what exactly the “right choices for our future” are, I’ve given myself a crash course in the system that has been boring America’s youth since the Great Depression. Social Security works on a pay-as-you-go basis, with most Social Security tax revenue that comes to the government going right back out again to the retirees who need it. Right now, this 6.2 percent tax is only taken out of the first $90,000 you make each year. With the president considering transferring Social Security funds into private accounts — a process that would cost roughly $2 trillion — he opened the possibility of raising this cap beyond $90,000. During a New Hampshire town hall meeting, President Bush said of the cap, “The one thing I’m not open-minded about is raising the payroll tax rate, and all other issues are on the table.” In other words, he won’t raise the rate beyond the current 6.2 percent, but he might be willing to raise the regressive cap.
I admire the open-mindedness of the president’s statement because it demonstrated a readiness to consider ideas beyond his pet privatization scheme. Imagine then my disappointment when I realized it was just empty rhetoric. The Republican leadership in the House, and even the White House, almost immediately backed away from what President Bush had said. Tom DeLay and Dennis Hastert both called any move to extend the Social Security tax to income higher than $90,000 an unacceptable “tax increase.” Despite the president’s talk, all issues are not on the table for the Republican Party, especially those that shift any financial burden toward the rich.
It is the poor who will be most at risk if Congress passes Social Security privatization. Currently one-fifth of American seniors (those 65 and above) live on Social Security alone. By shifting resources into private accounts, the Bush proposal requires a lower level of guaranteed benefits. Many seniors who narrowly avoid poverty as it is would find their futures dependent on the Dow Jones. The White House points out that the stock market historically outperforms standard government bonds and assures us that whatever money is turned over into private accounts will be invested in a relatively low-risk mix of stocks and corporate bonds. However, this avoids the basic point that a slow economy, or freak shifts in corporate stocks a la Enron, would dramatically hurt retirees.
Oddly enough, President Bush is promoting his old-age ideas to the young by arguing that college students might be the greatest beneficiaries of private accounts. While I can’t think of an unsexier issue around which to rally campus activism, Republicans seem to think it’s a winning strategy. Since the current Social Security trust fund, the money pot for all benefits, will begin shrinking in 2018, and be entirely empty by roughly 2050, today’s youth might truly need reform to shore up their distant retirement. The Bush plan would divert one-third of your Social Security tax into a private account at a maximum of $1,000 for the first year, with a $100 increase each year afterwards.
But privatization would put an unfortunate end to Social Security as we know it. It would eliminate the guaranteed benefits in exchange for possible returns, destroy the safety net for the old and disabled and tack massive debt onto future generations. Specifically, the transition into private accounts would cost about $2 trillion because one-third of the money coming into the system would be diverted toward the accounts, rather than sent to retirees. And in order to distribute benefits, the government would have to borrow about $2 trillion. I bet Bush wants that $1.3 trillion tax cut back right about now.
President Clinton, when tinkering with Social Security, realized that smart budgeting and surpluses could be used to shore up the trust fund. This may well be the real “right choice” for the future of Social Security reform. In any case, it’s much better than what Bush is currently doing — heading right back to STP.
Brett Edkins is a junior in Pierson College.