| Number 453 | April 7, 2010 |
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This Week: Social Security, Etc.
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Greetings, Sorry, no room for an editor's note in this edition. It's too long already! All I'll say is that the spell checkers in U.S.-made computers go crazy when I write about Pakistan and Afghanistan. Funny. See you next week, Nygaard |
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"The generous and unearned gift of the past" Writing about the phenomenon of some people getting very famous and often very wealthy for "inventing" (or at least for patenting) something or other, authors Gar Alperovitz and Lew Daly make an important point about the myth that great inventions and innovations come about solely because of the peculiar gifts of the "geniuses" among us. Writing in the current issue of Dollars & Sense, they say that "Most breakthroughs occur not so much thanks to one "genius," but because of the longer historical unfolding of knowledge. All of this knowledge—the overwhelming source of all modern wealth—comes to us today through no effort of our own. It is the generous and unearned gift of the past." |
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Here are a few selections from recent corporate media, all speaking about Social Security: From the Star-News, of Wilmington, NC, March 23: "The program's dismal outlook has long been known..." The ever-corporate Investor's Business Daily on March 30th said that "There is no trust fund." Here's a headline from New York Newsday, March 25: "Social Security in Red for 2010." According to the March 15th Associated Press, "there's concern that the looming crisis will lead to reduced benefits." And, finally, the venerable New York Times on March 25 said that Social Security has reached "a tipping point—the first step of a long, slow march to insolvency..." "Dismal outlook." "No trust fund." "In the Red." "Looming crisis." "Slow march to insolvency." Wow! This sounds serious! The only serious thing about all this hysteria is that quite a few people appear to believe it. Since the day it was created in 1935 Social Security has been hated by some people in this country. They hate it because of what it is: A program that redistributes wealth for the purpose of providing security to people in the event of disability, death, or retirement. There are still people who hate the idea of a public program that socializes the concern for security for all ("Social" and "Security" are not random words here) in the form of near-universal taxation and near-universal benefits. "Redistribution" is a dirty word for some people, as it interferes with the workings of "the market." For this reason the propaganda about Social Security has been non-stop, at least since I started intensively studying the program in 1997. The result of all this propaganda is that more and more people every year, including media people, are prepared to believe the worst about the program, as the quotations above illustrate. Here are a few basic points about Social Security to keep in mind when we are bombarded with Propaganda like that above. In no particular order... 1. About that "looming crisis" and the "slow march to insolvency." Well, the current official projections show a revenue shortfall for the program that will hit in the year 2037, assuming that absolutely nothing is done in the meantime. Two points here: I invite readers to let me know if you are aware of any other large program—public or private—that even attempts to tell you what will be happening with its finances 27 years in the future. I don't think you can. Social Security is required to project far into the future in order to allow legislators to make changes to the program well in advance in order to assure the solvency and continued viability of the program. And they project really far into the future—they actually look 75 years ahead!—in order to avoid needless disruptions and worry on the part of future recipients. So that's what's happening: The Social Security actuaries are telling us that we need to make some changes in the next couple of decades if we don't want the program to come up short. If some potential problems 27 years in the future add up to a "dismal outlook," then I wish my personal finances were so dismal. 2. "There is no Trust Fund." Yes there is. This is so stupid that it irritates me to have to keep addressing it. But I do address it in the other article about Social Security in this issue. 3. "Social Security is in the red." No it's not. Again, see the other article about Social Security in this issue. 4. We have reached a "tipping point." I don't know what this means, but the fact that some of this year's Social Security benefits will be paid with funds coming from interest on the Trust Fund instead of coming 100 per cent from this year's tax revenues is something that has been projected since about 1983. I can't imagine why it would be considered a "tipping point." And the Trust Fund, as we reach this "tipping point," still has approximately $2.6 trillion in it. Yes: Trillion, with a "T." 5. Finally, one thing that is rarely heard in the talk about the government's role in keeping the current recession from expanding into a full-blown depression is that we have a huge program in place that functions to prop up consumer demand during hard times: Social Security. That's right, when people are losing their employment income, and home equity is evaporating, and income from investments is shrinking dramatically, there are not too many things that remain constant in terms of providing income to people who will immediately pump that money back into the economy. The "tipping point" of having to draw on the interest in order to pump money into the economy is a function of the recession (which depresses Social Security tax revenues), and has nothing to do with the basic health of the program. Despite the U.S. going through at least ten recessions since the Great Depression, Social Security has never missed a payment in 75 years. The fact that those checks arrive every month, even in hard times, means that we now have a powerful anti-depression medicine built in to our system, medicine that was not available when the Great Depression struck. It could thus be argued that the existence of Social Security has played a role in preventing the Great Recession of the 21st Century from turning into a new Great Depression. Now let's have a look at the article that seems to have sparked the recent wave of anti-Social Security propaganda. |
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The article that seemed to spark the current mini-wave of hysteria about Social Security was a March 15th article put out by the Associated Press (AP) and reprinted widely. Headlined "Social Security to Start Cashing Uncle Sam's IOUs," the article is a veritable gold mine of disinformation and misleading innuendo, so I'll make an example of it in this little case study. It is by no means unique. Time to Tap the Nest Egg? The AP says: "For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits – billions more each year. Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes – nearly $29 billion more. Sounds like a good time to start tapping the nest egg." Actually... That "nest egg" is still growing. As a recent report by the Economic Policy Institute put it, "Social Security will continue to run a surplus for years to come, with the combined old age and disability trust funds projected to grow from $2.5 trillion in 2009 to $3.8 trillion in 2020." There's no need to take the EPI's word for it. The Congressional Budget Office report, which is what apparently got the AP reporter so excited, can be viewed on the CBO website. There we can see that, while Social Security benefits in 2010 will total about $697 billion and taxes collected will only total $642 billion, there is the little matter of the $120 billion in interest on the money already accumulated in the Trust Fund, which means that the size of the overall Trust Fund will actually increase by about $90 billion in 2010 (there are a few other bits of income and outgo that I didn't mention here). So no "tapping of the nest egg" is called for. The Government Spent Our Money! AP: "Too bad the federal government already spent that money [in the Trust Fund] over the years on other programs..." and "For more than two decades, regardless of which political party was in power, Congress has been accused of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit." This is the old familiar "There's no money in the Trust Fund" complaint. My answer: Of course there's no money in the Trust Fund. That's not how it works. Anywhere. As I have explained on several occasions, beginning in 1998 (Nygaard Notes #15 "Economics of Social Security for Beginners." Still available on the NN website) it is quite true that the government has spent the money in the Trust Fund, and anyone who knows anything about how bonds work knows this. Here's how bonds work: When you "buy" a bond, what you are doing is loaning money to the bond seller. In return you get a promise to get your money back at a certain time, with interest. That's the "bond." Once you have the bond and the seller has your money, the bond seller can do whatever she likes with the money. What she does is irrelevant, as long as she pays off the bonds on time. Since 1983, when the Trust Fund was created by Congress (acting on a proposal by the Greenspan Commission), Social Security has been collecting more in taxes than it needed to pay benefits. That was the plan, and the system was required to set aside the extra money in the safest possible place. The safest possible place for anyone's money is... U.S. Treasury Bonds. Would you, for example, prefer that Social Security invested its Trust Fund money in, say, Toyota? How about Citigroup? AIG? You get my point. People who want their money to be safe invest it in Treasury Bonds. T-Bonds offer low interest rates, but high security (higher interest rates are only required if a loan has higher risk) And Social Security is all about being secure, y'see. So when someone says "There's no money in the Trust Fund"
or "The government spent your money," I can only think of
two possible explanations. 1. They don't know what they are talking
about, or 2. They are trying to scare you. AP Says: "In all, [Social Security] has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on he open market." Nygaard Says: I can't imagine any comment that could be less relevant to anything. Of course the Social Security bonds are worthless on the open market. They're "special issue" bonds, which are more dependable and flexible than marketable securities. Other than implying that the bonds are somehow worth less than they would be if they were "in the market"—which is false, they're actually worth more for this reason—I honestly can't think of any meaning in this statement. Why would someone say this? Same two reasons as mentioned above. (You can read about "special issue" securities here. Baby Boomers AP Says: "Social Security's financial problems have been looming for years as the nation's 78 million baby boomers approached retirement age. The oldest are already there. As that huge group of people starts collecting benefits and stops paying payroll taxes Social Security's trust funds will shrink, running out of money by 2037, according to the latest projection from the trustees who oversee the program." When I wrote about this in 1998, I said this about funding Social Security: "Current projections are that the system will be 100% funded until at least the year 2032." So the system actually looks to be in a little better shape now than it was 12 years ago. And as far as the "financial problems... looming," that's why the decision was made in 1983 to set up a Trust Fund. Everyone knew that the retirement of the baby boom generation would increase the costs of the program, so we've been planning for it. "This is Simply Not True" The AP article begins by saying that "It's time to start cashing them in." The reporter is referring here to the bonds held by Social Security, which he calls "IOUs." He adds that "the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse." Here I'll quote a March 19th publication from the Economic Policy Institute entitled "Fact Check: Has Social Security Begun Tapping its Trust Funds?" Referring to the basic idea that Social Security has to start "cashing in" its bonds, EPI says: "This is simply not true. According to the Congressional Budget Office—the source cited in the [AP] article—Social Security will continue to run a surplus for years to come, with the combined old age and disability trust funds projected to grow from $2.5 trillion in 2009 to $3.8 trillion in 2020... Even though outlays will exceed payroll tax revenues, Social Security is not about to become a net seller of Treasury bonds, and is in fact still acquiring them to the tune of $100 billion a year. However, the [cashing in the bonds] story has taken off because it fits with the preconception that Social Security is in crisis and its finances are suspect." I imagine that similar stories will "take off" as 2010 unfolds, so I'll plan to continue trying to shoot them down as we go along. |
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On page 6 of the February 24th New York Times appeared a small story that told a big story. The headline caught my eye: "Gates Sees Danger in Europe's Anti-Military Views." Gates is Robert Gates, the U.S. Secretary of "Defense." Now, would it not be expected that the leader of the military forces of the most heavily-militarized nation on the planet might feel threatened by the idea of peace? Well, indeed he does. The Times article reported that "polls show that the Afghanistan war has grown increasingly unpopular in nearly every European country," leading Gates to complain that "public and political opposition to the military had grown so great in Europe that it was directly affecting operations in Afghanistan and impeding the alliance's broader security goals." There are a couple of remarkable things to note in this news article. Note first of all what it is that is newsworthy for the Times: What is newsworthy is the reaction of a high-level U.S. official to public opinion. What is not newsworthy is the actual public opinion that prompted the reaction. Also not newsworthy is the amazing amount of hard work on the part of untold numbers of peace-loving Europeans that has shaped that opinion. It's not that difficult to find news about the opposition to imperial violence that so concerns our military establishment. (Check out, for example, the work of the 119-year-old International Peace Bureau based in Geneva: http://ipb.org/ ) The second remarkable thing to note about this article is the implication that "operations in Afghanistan" have something to do with "security." That's highly debatable, but in this article—as in so many others—the relationship between "security" and military occupation is not up for debate. War Is Peace According to the Times, Gates told NATO officers and officials in a speech at the National Defense University, the Defense Department-financed graduate school for military officers and diplomats: "The demilitarization of Europe—where large swaths of the general public and political class are averse to military force and the risks that go with it—has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st." A more straightforward paraphrase of George Orwell's famous "War is Peace" slogan would be hard to find in the public record. Gates also said that the fact that "NATO was facing shortfalls of hundreds of millions of euros" was "a natural consequence of having underinvested in collective defense for over a decade." Underinvested? Hmmm... Perhaps a better interpretation might be that NATO is an alliance without a purpose, and the people of Europe recognize that. NATO was formed, after all, to defend against the Soviet Union and its allies in the Warsaw Pact. Now there is no Soviet Union—have you heard?—nor is there a Warsaw Pact, and Europeans have come to question the need to maintain an anachronistic, costly, destabilizing and pointless military alliance whose enemy does not exist. How this is evidence of an "underinvestment in collective defense" is a mystery to everyone but the U.S. War Secretary and his audience of fellow military personnel. And, apparently, to the New York Times. The Times reports that "NATO's problems" have been "greatly magnified by the expansion of its mandate beyond European borders, following 9/11." I think it would be much more accurate to say that "the expansion of NATO's mandate beyond European borders" IS the problem. And it's not "NATO's problem." It's a problem for all of the victims of this military alliance: the ones being killed by it as well as all of those in whose names the killing is being done. As an illustration of how easy it is to use a simple change in perspective to transform a "bad news" story into a "good news" story, let's invoke the familiar Nygaard Notes Alternative Headline. Instead of "Gates Sees Danger in Europe's Anti-Military Views," how about reporting the same facts under this headline: "European Peace Movement Increasingly Powerful; U.S. Warmakers on the Defensive." |
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The modern understanding of democracy at the level of the nation-state assumes that the foreign and domestic policies of a nation are best guided by elected and accountable civilians. Undue influence by unelected military forces is seen as anti-democratic, and rightly so. I'll have a lot more to say about this in the coming months, but for now I want to give a small example of how undue military influence in the governing of a country is portrayed differently in the U.S. media depending on where a country fits into the imperial scheme of things. Back in February, some remarks about Iran made by U.S. Secretary of State Hilary Clinton were widely reported. She was speaking to students in Doha, Qatar, when she said: "We see that the government of Iran, the supreme leader, the president, the parliament, is being supplanted, and that Iran is moving towards a military dictatorship. Now, that is our view... I fear the rise of the influence and power of the Revolutionary Guard... poses a very direct threat to everyone." And now for something completely different. About a month later—March 11th, to be precise—the New York Times ran a story with the headline "Spy Chief In Pakistan To Stay On Another Year." Here's the lead paragraph, followed by some noteworthy excerpts (emphasis added by Nygaard): "Pakistan's spy chief has been granted an unusual one-year extension in his job, a move that may also pave the way for a longer term for the head of the army, Gen. Ashfaq Parvez Kayani who is scheduled to step down this year. "The announcement extending the tenure of Lt. Gen. Ahmed Shuja Pasha as director of the spy agency, the Inter-Services Intelligence directorate, was formally made Wednesday by Prime Minister Yousaf Raza Gilani. But it had been clear for weeks that General Kayani planned to keep General Pasha at his side, and that the weak civilian government would have little choice but to go along with it. "The two generals have driven Pakistan's strategic decisions in the past two years. The likelihood that they would retain their posts represented continuity, at least, in one of Washington's most complicated, mistrustful and high-stakes relationships with an ally. "Senior American generals have invested enormous amounts of time on frequent visits to Islamabad, Pakistan's capital, in the past year, cultivating both generals... American officials have heaped praise recently on the Pakistani military... "As head of Inter-Services Intelligence, General Pasha runs the most feared agency in Pakistan, an institution with tentacles into many spheres of life..." The current "weak civilian government" in Pakistan is not technically a "military dictatorship," but that doesn't mean that the U.S. would push for sanctions on this nuclear-armed rogue state if is were a dictatorship. In fact, according to Farooq Tariq, general secretary of Labour Party Pakistan, "Since 1978 the different [Pakistani] governments have all been close US allies. This includes 20 years of military dictatorship under Zia [Ul Haque] (1977-1988) and General Musharaf (1999-2008)." So, there you have a Tale of Two Militaries. One is the military of an "ally" with a "weak civilian government" dominated by "the most feared agency in Pakistan," run by a General, an agency that appears to play the same role it played under previous "military dictatorships" that were also "allies" of the U.S. The other military is the military of an "enemy" nation, a nation that is not armed with nuclear weapons, that is in fact a signatory to the Nuclear Nonproliferation Treaty, and whose military is under the control of a non-military leader (the unelected "Supreme Leader" Ali Khameini). We are told that this military is in a country that "is moving towards a military dictatorship" and thus is "a very direct threat to everyone." Unlike, presumably, our "allies" in Pakistan. It appears that the criteria deciding who is an "ally" and who is an "enemy" has to do with something other than being a military dictatorship, doesn't it? And just think: We can see all this simply by reading the corporate media. It just requires a little decoding. |
