Like Nixon to China, it takes a Democrat to put the first knife into Social Security

Bottom line first, since this is turning long. For the owners of the country (and their paid national managers), the real emergency associated with Social Security isn’t the day the last dollar will leave the Trust Fund. It’s the day the first dollar will leave. That’s a whole different problem, and a whole different timeline, for them.

How did I come to that conclusion? Read on.

Why are benefit cuts one of Obama’s must-have goals?

In 2010, I started working on a thesis here at La Maison about the Social Security Trust Fund and have decided to both resurrect it and see what the numbers around it look like.

Some background: I’ve written about Obama’s (and neoliberalism’s) four big economic goals for his two tours of duty. For me, they are:

  1. Health care “reform” — a privatized alternative to Medicare expansion [done]
  2. A “grand bargain” in which social insurance benefits are rolled back [in work]
  3. Plentiful oil & gas and passage of the Keystone Sludgepipe (KXL pipeline) [in work]
  4. Passage of the Trans-Pacific Partnership (TPP) trade agreement [in work]

One of them doesn’t look like the others — item 2.

You can see the obvious benefit to billionaires and owners of the political system of a public-private health care “partnership” that enriches insurance and Pharma CEOs (item 1). On the oil front, Keystone will make David Koch and the other carbon lords even wealthier, and plentiful oil will extend the carbon regime from which so much wealth is extracted (“drilled”) out of the economy (item 3). Finally, TPP is just a geo-political wet dream for corps and their CEO owners, a one-stop international treaty that would elevate corporate power above sovereign power everywhere it’s implemented. New World Order indeed (item 4).

But benefit cuts? Why are both parties so hell-bent on eliminating or cutting Social Security benefits? Is there really that much at stake — for them? I’m going to slow-walk the answer in this post, and follow up later with numbers (this is turning into a research project on the numbers side). Let’s start with this …

The push to gut Social Security is real in both parties

First, make no mistake, both parties want to gut or kneecap Social Security. On the right (which is to say, among the rulers of the Republican party, not the voters) the Trust Fund is a big fat fruit, ripe for plucking and eating — $2.7 trillion and counting. That’s a lot of money to divert into the stock market, as Bush II tried to do in 2005. He was beaten back, partly because he was a Republican (keep that part in mind); but he gave it the college try.

Social Security via Shutterstock

Social Security via Shutterstock

On the “left” (as the Neoliberal rulers of the Dems like to brand themselves), the push is no less strong, but with slightly different changes on offer. The Wall Street billionaires would love to steal the Trust Fund outright, but you can’t sell that to Democratic voters, so when the “left” is in power, they don’t try to kill it so much as kneecap it, hobble it, cut its little hamstrings to keep it from walking.

The first Neoliberal president — the man who led the corporatization of the Democratic party — was Bill Clinton. He was also the first Democrat to rule after 12 years of Republican “revolution” that started in 1980, the year when everything changed. (Yes, you could call Carter a proto-neoliberal and be right, but that’s a tweak for this discussion.)

Clinton started the push to “fix” Social Security from the “left.” My earliest pieces written at this site addressed Clinton, Social Security and the Trust Fund. About Clinton, from May 2010:

Like Nixon to China: Obama and Social Security

Just like it takes a Republican to open Communist* China, it takes a Democrat to kill Social Security. … If you thought the corporate gifts in the so-called Health Care bill were bad, just wait till Obama’s so-called Deficit Commission gets its claws into Social Security.

Jane Hamsher put up a must-read article earlier this week that serves as a intro to her online salon with Steven Gillon, author of The Pact: Bill Clinton, Newt Gingrich, and the Rivalry that Defined a Generation.

In her intro, Hamsher discusses how Clinton worked with Newt Gingrich to pass pass a “fix” to Social Security. There were secret meetings and everything. (It almost looks like a club, doesn’t it.) The plan included the usual witches’ brew — cutting benefits, raising the retirement age, and fiddling with the cost of living increase. Even privatization was on the table, according to Gillon.

That effort failed, thanks to Clinton’s wandering mind . . . and Monica Lewinski. According to Gillon, the Monica scandal forced Gingrich back into the loving arms of his base, and killed the deal they were cooking up.

About those attempts, Hamsher wrote (my emphasis):

Clinton had been trying to deal with Social Security for some time. In 1994, HHS Secretary Donna Shalala had appointed the 13-member Danforth Commission to advise on Social Security. She appointed three members from labor (including Richard Trumka), Republican Alan Simpson (appointed by Obama to co-chair his Deficit Commission with Bowles) and Pete Peterson (the hedge-fund billionaire funding much of the current economic work being used to justify dismantling Social Security).

Pete Peterson was a member of the commission Clinton appointed to “fix” Social Security. Let that sink in. This is why Clinton regularly speaks at big-deal Pete Peterson events (well, that and the potentially lucrative speaking fees).

Click through for the details — Erskine Bowles was Clinton’s reach-out man to Gingrich.

Clinton, Peterson, Simpson, Bowles in 1994. Obama, Peterson, Simpson, Bowles in 2010. If the complicit corporate media weren’t so silent (that’s you, MSNBC), this would all be seen as one big push on the Dem side, just like Bush II in 2005 and Paul Ryan privatization today is one big push on the Republican side.

Your must-remember takeaway — Bill Clinton was as eager a benefit-cutter then as Barack Obama is now, and for the same reason. It’s a two-party effort and always has been. But what’s the reason? To answer that, we have to look at the Social Security Trust Fund, created during the Reagan years by the Greenspan Commission.

What’s the real purpose of the Trust Fund?

As a follow-up to the “Nixon to China” piece quoted above, I tried to tease out just what Social Security and the Trust Fund were, from the standpoint of the billionaires (then mere multi-millionaire pups) and their minions in the 1980s (new emphasis and some reparagraphing):

How to kill Social Security: Be ignorant about it

… It seems that despite years of public discussion — from the Bush push of 2005, to Obama’s suspected embrace of a Peterson cat food future — many of us still don’t know what Social Security is and how it’s been used. And that’s how they’ll kill Social Security — by turning our ignorance against us. So in the interest of actual information, a few basics:

1. You don’t contribute to your own retirement. You never did. No one did. Your parents’ money went to your grandparents. Your money goes to your parents. Your kid’s money goes to you. It’s an inter-generational contract. It always was.

This is not a program that’s designed to manage your money for you. It’s a program that’s designed to do “good works” — every generation keeps its parents off of cat food. Period. That’s the whole goal. …

2. You already “fixed” Social Security, in 1983. In that fix, Ronald Reagan and the Greenspan Commission (yep, Alan Greenspan) recommended increasing Social Security taxes on the middle class, but not on the Big Boys, the wealthy. The declared goal was to put tons of cash into the Social Security Trust Fund — create a huge rainy day stash — for when Boomers started retiring. (If you click the Trust Fund link, watch what happens to the last column, the total amount, starting in 1984.) … They robbed you once, so they wouldn’t have to do it twice. … [And they failed to adjust for this, which made things worse for us going forward.]

3. Reagan used that earlier “fix” to hide much of his massive deficit, to make it look smaller. That was the real goal (or if you’re feeling kind, the other real goal) of beefing up the Trust Fund. … [D]o you think either of them cared two twits about fixing … a future in which they themselves would be dead? The facts show just the opposite. What they really cared about was destroying the future — “starving the beast” in politer terms — while making it look like the beast was partially fed. …

The Reagan tax cuts steadily lowered the rate on the top dollars earned (keep that “top dollar” point in mind; mere mortals never saw those rates) from 70% to 50%, then to 28%. Those tax cuts, plus his massive spending, made the deficit rocket skyward. Mission accomplished; beast starving.

But how to make that deficit look smaller to the easily fooled? Simple. Grab a huge pile of cash from the middle class, invest that cash in Treasuries, and declare those Treasuries off-budget. Voilà — beast looks partially fed. …

4. The real goal of [the Clinton, Obama] fix is to hide the looting of the last fix. Just like the last time, the goal isn’t [fixing] Social Security itself. The last fix hid the mounting deficit in off-budget Treasuries. But soon those Trust Fund Treasuries might actually get cashed. Since the government would have to borrow to replace them, that transfers the off-budget numbers back on-budget. Oops. …

[T]he deficit hawks aren’t worried about spending the last dollar of the Trust Fund. They’re worried about spending the first dollar. They’re searching for what they can take from you, the impotent many, so that no dollar of the Trust Fund gets spent [and the powerful few never see another tax increase]. …

And there’s your answer. They used your money to patch and paper a hole. The cover-up of that patch job keeps them all in office; keeps them all from looking like thieves and you from looking like dupes and patsies; keeps the rube wallets open for the next round.

Bottom line

You could answer the headline question above (“What’s the real purpose of the Trust Fund?”) in either of the ways indicated above:

▪ You could be generous and say that someone somewhere in this mess — someone at the decider level — actually cared about Social Security, as well as about the looting, that there were perhaps good and bad goals intermixed. In the 1980s that may have been true; I’m not sure. Is it true today?

▪ Or you could say that no one at the decider level really cares about the program itself. They care about the political effect of having (but not ever spending) the Trust Fund’s $2.7 trillion.

When I see people talking today about “protecting Social Security” while (a) starting to dismantle it, and (b) ignoring one of the biggest sources of real revenue — removing the income & salary cap — I can only pick the second choice above, certainly for the post-1980s crowd. Heck, if Clinton had looked at wealth inequality and simply raised the salary cap to its original level — to capture 90% of all income, as it did in 1984 — the Trust Fund would have $1.2 trillion more today. But that wasn’t going to be his solution. Pete Peterson and Alan Simpson were on Clinton’s commission for a reason, and we all know what Peterson and Simpson want — dismantlement and benefit cuts. The knife.

It’s one thing to say you need revenue and then misallocate it. It’s another to start cutting the program itself. At the level of the deciders today (and them only, not the great economists and experts lower down), this is not at all about Social Security; it’s about the political effect of having and using the Trust Fund, and only that.

Note that I twice said “political effect” of the Trust Fund. This is not about numbers either; numbers are just the shell game, the fog. It’s about power, staying in power, keeping people who keep them in power happy. It’s about not raising taxes while screaming about the deficit. Manipulating the Trust Fund has a role to play.

The Republican Party’s owners (their donors) want to loot the Fund and will say so. Again, recall the Bush Push of 2005. The present owners of the Democratic Party includes Wall Street, and they too would like to confiscate the Trust Fund (by “investing” it for you and depleting it with fees). But Democrats can’t say they are looting, because “starve the beast” (and feeding on the flesh) has to be sold differently to Democratic voters.

Democratic voters have to be told they’re “helping,” serving the interests of the next generation. So from the “left” the idea that cutting benefits (shrinking the program itself) trumps cashing in any of the Trust Fund … that has to look like “reform,” not just straight theft, or it won’t begin to fly.

So we’re back to the beginning. Like Nixon to China, it takes a Democrat to put the first knife into Social Security and reduce its actual size. That’s why “benefit cuts” is high on the must-have list of each Democrat who takes the post-Reagan princely throne. Each one … including the next one, in case Obama fails.

Next up in this series

This is theory, explanation, and needs to be fleshed out. I’m going to see if I can get some numbers. The size of the Trust Fund is known, but this is also about dates. The Bigs (who love you and want you to be happy) tell you that the care-about date is 2035 (or whenever), the day the Trust Fund runs dry. That deadline induces yawns, one of the problems that its eager promoters have.

But if I’m right, the real deadline is when the first dollar leaves. When is that? Right now, I don’t know. And when that occurs, what’s the rate of decay? What does that graph look like? Again, I don’t know, but it matters. That’s the rate at which the general fund has to make up for the loss, somehow.

I’d love to find out both data pieces, wouldn’t you? Especially the date when the Trust Fund starts cashing those Treasuries. I’d bet money that this is the cause that’s making the Bigs panic and sweat. Stay tuned.

GP

To follow or send links: @Gaius_Publius


Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

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  • http://www.facebook.com/joetheeconomist Joe Economist

    Tool

  • condew

    Troll

  • http://www.facebook.com/joetheeconomist Joe Economist

    “I contacted Steny Hoyer’s office (my congressman) and bent the ear of his staffer for a half hour ”
    A fine use of our country’s tax dollars. And we wonder why the government is heading for bankruptcy.

  • http://www.facebook.com/joetheeconomist Joe Economist

    “Or you could say that no one at the decider level really cares about the program itself. They care about the political effect of having (but not ever spending) the Trust Fund’s $2.7 trillion.”
    It is odd that this blog runs on the banner : “A Great Nation Deserves The Truth”. Apparently it doesn’t deserve the whole truth. Against, the 2.7 trillion the system has promised more than 23 trillion in benefits. On page 15 of the Trustees Report, you will find that the system has a 20.5 trillion dollar shortfall – and that is in a good economy.

  • http://www.thepolemicist.net/ The_Polemicist

    I love your formulation that it’s the first dollar out of the Trust Fund they’re after. The first cut is the deepest. They are, indeed, trying to cover the theft of what’s been collected from the middle class since the Reagan-Greenspan “reforms.” See my analysis at Social Security in the Great Jambalaya, (as well as here, here and here)

    As I said in those posts, “the next Obama administration, claiming to be standing on the high ground of principle, will be, and will be proud to be, the first administration to cut Social Security. Guaranteed. And they’ll sell it as a ‘save.’ Obama and the Democratic Party really think it’s the right thing to do.”

  • Bill_Perdue

    Thanks for catching that. I changed the phrase to ‘Kennedy invaded Cuba and delayed signing orders to end housing discrimination’.

    Clinton was the most successful president of the last century and Obama is the most successful president of this century, as I pointed out.

  • EternalVigilance

    The outright theft of Americans’ retirement funds is perhaps the biggest unreported story of our time.

    The public version is the looting of Social Security. This has already occurred – you’re correct in your observation that it’s the conversion of the trust fund IOU’s back into real cash that is what Washington/Wall Street want to prevent, since that conversion would expose the theft.

    The private version is the theft of pension funds from private and public employees. Pension funds weren’t a gift of kindness and largesse from ownership to workers, they were by legal contract a part of workers’ pay. And now, as with Social Security, the big push is to hide the truth that this money too has been stolen – stolen by having given it away in executive and shareholder compensation, gambled it away on Wall Street con games, or never funded in the first place.

    This theft totals many, many trillions of very real dollars, taken from the working people of America when they’re most vulnerable, and given to the ruling class.

    This is not simply the oligarchy’s usual parasitic behavior. It is literally the wealthy and powerful cannibalistically feeding, like a cancer, upon the entire body of society.

  • ronbo

    So much truth deserves to be read by the world. Too bad our media is owned by the wealthy who will benefit from the deception that is “saving” something by hobbling it. Enter Kathy Bates… er, I mean President Obama

  • http://poodyheads.wordpress.com/ zorbear

    why is Kennedy refusing to delay ending housing discrimination a bad thing?

  • Bill_Perdue

    Thanks, but I think it’s the politics, not the writing. I lived through all that and refuse to forgive or forget.

  • http://adgitadiaries.com/ karmanot

    pppfffffttttt

  • http://adgitadiaries.com/ karmanot

    :-)

  • Sal

    Very well laid out. I wish I had the writing ability that you do.

  • Sal

    But, that would hold, even if this even if this naive Mike Meyer guy were to call Pelosi or Obama.

  • Sal

    LOL. Though the Republican’s work is just as much the Democrat’s work, especially since the Democratic party’s corporatist makeover in November 2008.

  • Sal

    GP:

    Great post, though I found it a bit hard to follow due to my lack of chronological knowledge of history.

    The important point is that the Republicans could have never gut social security by themselves. But, since the neoliberal Obama so desperately wants to gut Social Security, that is likely to happen. And, that is why I blame the people who voted for Obama (because for them, he is the lesser of the two evils) when Obama guts social security. Obama is not the lesser of the two evils – he is one of the two evils. Both the political parties are sold out to the billionnaires and the multi-millionaires.

  • http://blogvader.tumblr.com/ Blogvader

    DOMA’s days are numbered regardless of who won the last election, because a majority of young voters support it. We’re just waiting for the boomers and their associated insecurities to die off.

    The problem is, on the big ticket items, there is no substantial difference between Democrats and Republicans. They all support bailouts. They all support permanent war. They all support the wage tax penalty.

    There are better options. Unfortunately, too many folks like yourself are too blind to acknowledge that they exist.

  • nicho

    Make sure you mention that you pay him more than Wall St. Will. Otherwise, don’t waste your time.

  • confusion

    Down and dirty…another political party

  • Swami_Binkinanda

    Would Romney have even grudgingly approved gay marriage and the end of DOMA, yes or no?
    Would Romney have approved civil unions, gays in the military?
    Yes? No?

    Is the perfect the enemy of the good? Is the choice between getting punched in the gut or square in the face? Maybe. Is it easier to complain on the internet than rag on your politicians? most definitely.

  • Bill_Perdue

    Then call the White House at 202-456-1111 and tell the Scab in Chief to stop busting unions and imposing ever more draconian austerity measures.

  • Bill_Perdue

    Democrats as soft cops and Republicans as hard cops is a scam that been played out since the last depression.

    Truman committed ghastly war crimes at Hiroshima and Nagasaki, began the witch-hunts by requiring “loyalty oaths” and invaded Korea.

    Kennedy invaded Cuba and refused to delayed signing orders to end housing discrimination.

    LBJ invaded Vietnam, killing millions and assured the passage of tepid civil rights laws that have little effect on institutional racism. He and Nixon carried out an illegal campaign to murder Malcolm X and James Shabazz, refused to robustly the murders of SNCC workers (1) and unleashed racist FBI agents and local police who murdered member of the Black Panther Party in cold blood. (2)

    Carter interfered in the Iranian Revolution and began the program to destroy unions with deregulation of Ma Bell and deregulations in rail and air transport. Hundreds of thousands of union jobs were lost. Carter began the deregulation of Credit Unions in in 1980.

    Clinton was the most successful Republican president of the last century. Reagan and Bush couldn’t get NAFTA passed but Clinton elbowed it through Congress and signed it, exporting tens of thousands of union jobs. He played the same role with the deregulation acts of 1999 (Financial Services Modernization Act of 1999) which ended Depression era banking regulations and 2000 (Commodity Futures Modernization Act of 2000) which unleashed predatory lenders who caused the housing bubble which burst and caused the current – Clinton – depression. DOMA was another Republican bill that Clintons embraced, signed in the dark of night and then boasted about signing it. DADT was a bipartisan effort by Democrat and Republican bigots).

    As Gaius Publius explains so well in his post, Obama is unquestionably the most successful Republican president of this century.

    (1) Who served six year each for murdering Michael Schwerner, Andrew Goodman, and James Chaney.

    (2) “Julian Bond, a member of the Georgia state legislature, said, “The Black Panthers are being decimated by political assassination arranged by the federal police apparatus.”M Whitney Young, executive director of the National Urban League, urgently requested the Attorney General to convene federal grand juries in those “jurisdictions where nearly 30 Panthers have been murdered by law-enforcement officials.” No cops or FBI agents were prosecuted for these murders. http://www.edwardjayepstein.com/archived/panthers.htm

  • cole3244

    i know, but since i have so little time to dream, i have a dream.

  • http://adgitadiaries.com/ karmanot

    Call Boehner what?

  • http://adgitadiaries.com/ karmanot

    It’s too late.

  • http://adgitadiaries.com/ karmanot

    LIKE+

  • http://blogvader.tumblr.com/ Blogvader

    But… but… the Republicans are worse, Becca! (Never mind that Democrats are doing the Republicans’ work for them.)

    Or at least, that’s the prevailing thought around here.

  • http://www.rebeccamorn.com/mind BeccaM

    Long story short: We’re screwed if we don’t do anything, and especially if we keep voting for the men with their hands in our pockets.

  • cole3244

    the only way to save our dem system of govt and safety net is to start electing pols left of center not just pols that are left of the rw opposition, that is, and has been established a formula for disaster.

  • caphillprof

    Gaius, it’s a mistake not always to start any Social Security conversation or essay with the fact that the retirement component of Social Security is an INSURANCE SYSTEM funded by a payroll tax with an arbitrary ceiling and it is not an investment system or pension system.

    It’s also a mistake not to point out that George W Bush gave us a war in Iraq and a war in Afghanistan without raising any revenue to pay for these wars. The raid on the Social Security Trust Fund, the IOUs down at the Treasury, actually financed the Bush wars and now that it is time to pay the piper they want to end Social Security (i.e. steal the money) rather than implement the war tax that Bush failed to do.

  • Mike Meyer

    SAVE YOUR SOCIAL SECURITY, call John Boehner @1-202-225-0600. Stop the backstabbing.

  • KarenJ

    Viewing askance, the board of directors of “Fix the Debt”, too…

    Erskine Bowles (NC),
    Senator Alan Simpson (WY)
    Co-Founders, Campaign to Fix the Debt

    Senator Judd Gregg (NH),
    Governor Ed Rendell (PA),
    Mayor Michael Bloomberg (NY)
    Co-Chairs, Campaign to Fix the Debt

    Campaign to Fix the Debt Steering Committee
    Governor Phil Bredesen (TN),
    Senator Kent Conrad (ND),
    Senator Pete Domenici (NM), Congressman Vic Fazio (CA),
    Congressman Jim McCrery (LA),
    Senator Sam Nunn (GA),
    Congressman Jim Nussle (IA),
    Mesa AZ Mayor Scott Smith (President, US Conference of Mayors),
    LA CA Mayor Antonio R. Villaraigosa,
    Senator Tim Wirth (CO),

    Ambassador Robert Zoellick (former President, World Bank),
    David Cote (CEO Honeywell),
    James B. Lee, Jr. (JPMorgan Chase & Co),
    Maya MacGuineas (pundit, Dir., New America Foundation),
    Michael Peterson (President and COO, Peter G. Peterson Foundation),
    Steven Rattner (former Counselor to former SecTreas for Obama Admin),
    Alice M. Rivlin (former member of the President’s Debt Commission),
    Margaret Spellings (GWBush Sect. of Education)

    http://www.fixthedebt.org/who-we-are

  • Mighty

    Completely remove the wage cap. Also allow working people today to add extra if they would like. Link this extra to a tiered benefit system for them when they retire. Just a thought.

  • jomicur

    This country is on a downward spiral–dare I say a death spiral?–and the gulls who insist on perpetuating the political status quo by supporting either branch of our one political party are hastening the end ever faster. It was obvious in 2008 to anyone who bothered to look what Obama really was, but the simps never bothered to look and supported him anyway. If they don’t wake up and start building alternatives ( and I have no confidence at all that they will), we will quickly reach a state of affairs that will make The Gilded Age look like an egalitarian paradise by comparison. Hell, even the high Middle Ages will look like a populist Eden.

  • nicho

    How do I get thru to a willfully dense elected official

    You have to bribe him — offer him more money than the corporations have. Politicians are very malleable that way.

  • condew

    I commend you on exposing the plot, definitely the first step. But what’s to be done after that?

    I contacted Steny Hoyer’s office (my congressman) and bent the ear of his staffer for a half hour about how I object to his calls for cutting to Social Security, only to get an email from him a few days later about how glad he is that I agree with his efforts to “strengthen” Social Security.

  • nicho

    Obama was the biggest con job ever pulled on the American people. People on the left flocked to him as if he were the Messiah, when he was really just a crafty Chicago pol working for the corporatocracy. People on the right hated him for all the wrong reasons, making them look like idiots. He’s not a socialist Muslim from Kenya. He’s a corporatist money worshipper from Chicago and Wall Street.

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