march 2005

sOCIAL sECURITY rEFORM IS PRESENTLY OBSESSING "WESTERN"gOVERNMENTS WHO WANT TO IMPROVE THEIR INCOME AND PLACE THEIR FINGERS IN SOME MORE WALLETS TO PAY FOR THE "war", TERRORIZING THE HUMAN RACE

American Radio Comment:
Commentary from The Laura Flanders Show ,
February 5, 2005

Oh really. How dumb does George really think we are? Does the President really think we'll fall for it a second time?

Trust fund bankruptcy?

The Bush team are rolling sometime-a-hundred years from now estimates of the Social Security Trust fund's solvency.

There's that magic word again: security. "This is just a better deal," says W. "The goal is greater retirement security."

The President's plan gives one set of folks security and those are the people at the financial services firms. Don't take it from me. Take it from the Wall Street Journal. "If only two percentage points of payroll tax were diverted into privatized accounts, this would mean $60 Billion a year could flow into mutual funds and other securities," as reported by the WSJ Feb 20 1996. And that's a low-end estimate.

The world's biggest 401k for someone to manage. Which fund wouldn't want that? No wonder the Wall St. middle men are marshalling millions to push Bush's dream-scheme. If they pull it off, we the taxpayers will pay them of course, out of our no-longer guaranteed "benefit." Look at Great Britain - over 40 % of the money accumulated in privatized accounts there is being spent on fund management fees. In Chile, it's over one third.

How would it work? W could tell you but he won't. People divert part of their payroll taxes into private accounts. That money would be their own, the President assured us last week: "the government can never take it away." Right. But the government will take a way a huge hunk of those separate social security checks, in exchange. In fact, they'll be cutting those checks by exactly the amount the private investor earns in the market, minus inflation (and those fees.) No matter whether you've chosen to participate in Bush's wacky scheme or not, everyone's benefits will be cut to cover what there is of an anticipated Trust Fund shortfall because Bush's plan doesn't even pretend to address that anymore. Now that's Congress's job. In fact Bush said in the State of the Union that he's "open to anyone who has a good idea." Now do you feel more secure?

Clearly, the White House has reasons to keep the public distracted.

What's next? Will Condoleezza Rice go before Congress with a vial of scary-looking bankruptcy notices?

"All it would take for one or two of these to escape and future generations of retired people will be ruined, ruined……"

I can hardly wait.



Laura Flanders is host of The Laura Flanders Show on Air America Radio.

###

FPF-PS: In Sweden the same foul cabal as in the US has already succeeded: in an article yesterday in the Swedish newspaper Aftonbladet investigating journalist Dan Josefsson asks the question: ''are they going to screw the americans the same way with the privatizing of the Social Security as they have done to us?"

Loss of 22%

It shows in Sweden that after the implementation of the same criminal rules as Bush et al is advocating, now 'to give more security' - the pensioned Swedes all loose 22% (twenty-two percent) of what they should have had: the money robbed by the banks and fundholders taking out huge sums on their own behalf, top gains paid for by the poor again.

In the Netherlands the criminal banks and their government and media are advocating the same, trying to rob the people blind.

All in the name of security, but one should ask:

Security for whom ?

FPF-fwd-HR

Press Release Source: Allen W. Smith

Social Security Trust Fund Fraud May Become Bush's Watergate, Suggests Author of 'The Looting of Social Security'
Tuesday February 1, 11:47 am ET
http://biz.yahoo.com/prnews/050201/fltu022_1.html

WINTER HAVEN, Fla., Feb. 1 /PRNewswire/ -- Economist and author Allen W. Smith, Ph.D., argues that the biggest obstacle to getting clear debate on the Social Security problem is the misinformation that continues to be spread by the AARP and others who argue that the trust fund holds real assets. "It is amazing how many people, including some Social Security experts, still just don't get it!" Smith said. "Weisbrot and Baker continue to spread the myth that, 'The Social Security trust fund will have more than $3.7 trillion in today's dollars in 2018.' Unless there is a change in policy, the trust fund will not have even $1 of real assets in 2018!"

Smith points out that David Walker, Comptroller General of the Government Accounting Office (GAO), while speaking at a Washington luncheon, co-hosted by Centrists.Org and the Alliance for Worker Retirement Security on January 21, 2005, said, "The left hand owes the right hand, and that has legal, political and moral significance. But it doesn't have any economic significance whatsoever. There are no stocks or bonds or real estate in the trust fund. It has nothing of real value to draw down."

"If the Comptroller General of the GAO says there is 'nothing of real value' in the trust fund, then there is nothing of real value," Smith said. "So what happened to the $3.7 trillion that so many people believe will be in the trust fund in 2018, or the $1.6 trillion that is supposed to already be in the trust fund today? The government has 'borrowed' it and made no provision for repayment of this debt."

The Social Security surplus generated by the 1983 payroll tax increase was supposed to be used to pay down the public debt. This would have been accomplished by purchasing regular marketable Treasury bonds in the financial markets. If this had been done, the trust fund would contain real assets and it would be able to pay full benefits until 2042. However, Smith maintains that President George H.W. Bush began using the money as if it were general revenue, and non-marketable special issue government securities were issued. Smith says that President Clinton continued this practice, so every cent of the Social Security surplus that flowed in under both Bush Senior and Clinton was spent. This misuse of Social Security funds became a major campaign issue in 2000, and both George W. Bush and Al Gore pledged to end the looting. President Bush repeatedly promised not to touch the Social Security money. Finally, in his first State of the Union address, delivered on February 27, 2001, Bush said, "To make sure the retirement savings of America's seniors are not diverted to any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security, and for Social Security alone."

In casting their votes in the 2000 election, the American people, whether they voted for Gore or for Bush, were voting for a candidate who had solemnly pledged repeatedly that no Social Security money would be used for non-Social Security purposes. Smith argues that George W. Bush violated both that pledge and federal law when he spent every dollar of the $509 billion in Social Security surplus that was generated during his first term. "He continues to violate his pledge, and the law, each and every day as he spends the approximately $400 million in Social Security surplus that becomes available on a daily basis," said Smith.

Smith argues that the Bush privatization proposal is a Trojan horse to distract attention away from the looting of Social Security money. According to Smith, "Bush and Greenspan know that the government will face a major financial crisis beginning in 2018 when Social Security begins to run deficits, and the public discovers that there is nothing of value in the trust fund." Smith believes that "given the fact that Bush acknowledged the looting problem during the 2000 campaign, and made a solemn promise to the American people to end the practice, his misuse of Social Security money is a serious breach of the public trust," and Smith suggests that historians may refer to Bush's misuse of Social Security funds as "Bush's Watergate."

CONTACT: Barbara Rugel (863) 206-4431 or Allen W. Smith (863) 206-4292;
email: ironwoodas@aol.com
Website: http://www.lootingsocialsecurity.com



Upcoming Conference

Social Security: The Opportunity for Real Reform

February 8 & 9, 2005
Cato Institute
1000 Massachusetts Ave
Washington, DC

Featuring Edward Prescott, Winner, 2004 Nobel Prize in Economics; Martin Feldstein, George F. Baker Professor of Economics, Harvard University; and Douglas Holtz-Eakin, Director, Congressional Budget Office.

How involved in this Reform movement is Govt. Profit?:

Privatizing the Social Security Trust Fund?
Don't Let the Government Invest.....

by Krzysztof M. Ostaszewski

Krzysztof M. Ostaszewski, the 1995 Fulbright Research Fellow in the area of social insurance, is the actuarial program director at the University of Louisville. He is a member of the Social Security Committee of the American Society of Actuaries.

Executive Summary

Given Social Security's dire financial condition, there is growing interest in attempting to harness the power of private capital markets to bail out the faltering system. However, despite its surface attractiveness, allowing the government to invest funds from the Social Security trust fund in private capital markets would be a terrible mistake that would have severe consequences for the U.S. economy.

It is easy to see why this approach has appeal. The trust fund is currently "invested" in government bonds. Allowing this money to be invested instead in private capital markets would appear to give the trust fund an opportunity to earn a much higher rate of return. Using this return to fill in some of the gap between future revenues and benefits would reduce the need for future tax increases or benefit cuts.

In reality, however, this approach is fraught with danger. Allowing the government to invest the trust fund in private capital markets would amount to the "socialization" of a large portion of the U.S. economy. The federal government would become the nation's largest shareholder, with a controlling interest in nearly every American company. Government ownership brings with it serious problems of government control and is a threat to the efficiency and competitiveness of the U.S. economy.

Moreover, experience in other countries has shown that government investments seldom achieve the rates of return seen in private investment. Attempts by the government to manipulate the markets could further undermine returns and threaten general market stability.

A much better approach would be to let individuals invest their own retirement money through true privatization. A system of individual private investment accounts, like that in Chile, would allow people to benefit from higher market returns without risking increased government involvement in the economy.
Possible Options but remove Gore's name with Bush and remember Bush needs money to fight his wars:

Social Security or Environmental Socialism?

by Patrick J. Michaels

Patrick J. Michaels is senior fellow in environmental studies at Cato Institute and science advisor to the Greening Earth Society in Arlington, Virginia.

Let's stipulate that President Clinton, who has proposed investing Social Security trust fund money in the stock market, really won't have anything to do with it. He'll be out of office long before anything of the sort will happen. Rather, responsibility for implementing the plan would go to Vice President Gore, should he get the promotion he's been angling for. And how do you suppose he'll do it?

Would Gore take the advice of Jesse Jackson? Recently, Jackson told the House Ways and Means Committee that the federal government should use its ownership of stocks as a vehicle for furthering noble goals. Such investment could be used, Jackson suggested, against tobacco companies or folks who "poison the environment."

The amount of cash that would be at federal disposal (roughly 5 percent of the current valuation of all commonly traded equities) would allow purchase of a controlling interest in just about any company. As principal stockholder, the government could then vote, say hypothetically, a coal company out of existence. Or it could make it halt mining activity and start producing windmills. It could then subsidize that wildly inefficient and unreliable way of producing electricity to the point of putting coal-fired utilities out of business. The possibilities are endless and require little imagination.

Would the vice president like to do that? In his 1992 bestseller, Earth in the Balance he wrote (on page 272 of my paperback edition) that protecting the environment and stopping global warming should be the "central organizing principle of our civilization." On the next page he tells us what that means:

"Adopting a central organizing principle … means embarking on an all out effort to use every policy and program, every law and institution, every treaty and alliance, every tactic and strategy, every plan and course of action … to halt the destruction of the environment."

Well, if writing a bill to invest Social Security funds in the stock market isn't a "policy," a "program," a "law" applied to an "institution," a "tactic," and/or a "strategy," I don't know what it is. And if the "central organizing principle" doesn't apply here, well, where on God's getting-greener (thanks to carbon dioxide and global warming) earth does it?

On page 320 of the same volume, Gore gives us the plan. It includes "tax incentives for new technologies." President Clinton proposed some of those to fight global warming in his recent State of the Union speech.

Gore also proposes "bans" on "research and development" involving "old technologies." There's certainly no constitutional way for the government to prevent someone from doing research (we presume Mr. Gore, having spent a little time in law school, has some grasp of the Constitution's protections) on, say, coal-fired electricity production, so he must have another mechanism in mind. Like maybe a little pressure from the principal stockholder in our hypothetical coal company.

Three lines later, he says that the government should create "the promise of large profits in a market certain to emerge as older technologies are phased out." How does one do that? First, have the big federal stockholder tell all those energy companies to stop doing research on product development (i.e., to go out of business). Now that we've gotten rid of hypothetical coal companies, who is left to produce electricity? Whomever they are -- natural gas people, windmillers or whatever -- they'll now be de facto guaranteed huge profits because the competition was just forced out of business.

The fact is that 56 percent of this nation's electricity is currently produced by the combustion of coal. That's up several percent in recent decades, mainly because coal is cheap, abundant and can now be burned very cleanly. About the only emission that comes out of the newest plants is carbon dioxide, the cause of dreaded global warming.

What kind of political support might an investment program to get rid of coal enjoy? For decades, the competing, but more expensive, power sources, such as natural gas, nuclear and solar, have sought to find a way to commandeer a chunk of coal's 56 percent of the energy pie. They'll be out PAC-ing for the Social Security investment bill in less time than it took Mr. Gore to write the words "promise of large profits."

The only losers will be everyone else, forced to pay more for electricity by a government that now has been granted the power, in one fell swoop, to do whatever it pleases to whomever it wants.

Comments on reform still relevant today:

The Stock Market and Social Security Reform

by Andrew G. Biggs

Andrew Biggs is a Social Security analyst at the Cato Institute and a former staff member of the President's Commission to Strengthen Social Security.

Does a falling stock market mean the end of efforts to add personal accounts to Social Security? It shouldn't. Today's stock market presents a good test for personal accounts. And despite the gloating of critics as market indicators fall, accounts pass that test with flying colors.

Imagine you were offered the following deal: You could invest part of your Social Security taxes in a personal retirement account, similar to an IRA or 401(k). However, your account could hold nothing but stocks. You couldn't diversify to bonds or other stable investments as you aged. Making matters worse, you would retire during the biggest bear market since the Great Depression, with the S&P 500 stock index falling from 1500 in April to 900 today.

It sounds like a sucker's bet, but I would take it in a minute. Because even in a market tailor-made for opponents of reform, personal accounts would pay substantially higher retirement benefits than the current Social Security program while giving workers ownership and control over their savings. Barring Armageddon, you can't lose.

Stock returns have averaged 7 percent after inflation throughout American history. Even after the recent market drop, a worker retiring today and holding only stocks would have received about 6 percent annual returns, far above the 2.5 percent return an average couple can expect from Social Security (even after including all survivors and disability benefits). Higher rates of return, compounded over decades, could double or even triple a worker's retirement nest egg.

One reason personal accounts can weather market downturns is time: However bad the market's recent performance, a worker retiring today would have begun investing in the late 1950s, when the Dow Jones index resided at one-tenth its current value. Over periods of 20 years the stock market has never once lost money, a boast supposedly "safe" government bonds cannot make. Even a worker retiring in 1933, in the depths of the Great Depression, would have received a 4 percent real average return.

Even so, today's stock market is scary. That's why most workers diversify as they age. According to a 2000 study, a typical worker in his 60s has only 40 percent of his assets in stocks. Such a worker would have lost just 3.25 percent last year, since bond prices rose while stocks fell. Low-wage workers, who hold smaller portions of their holdings in stocks, would actually have made money last year. That's the power of diversification.

Finally, personal accounts would be voluntary. No worker is forced to take an account, and no worker with an account is forced to invest even a penny in the stock market. Under plans from the President's Commission to Strengthen Social Security, all workers over age 55 would remain in the current system and receive every penny they're promised. Current and near-retirees have nothing to fear from reform, while younger workers would finally have a choice.

It's that element of choice, control, and ownership that keeps Americans supporting personal accounts even when the politicians and pundits get the jitters. A Zogby International poll conducted for the Cato Institute July 8-12 - a period when the Dow Jones Industrials Index fell almost 700 points - shows 68 percent of likely voters supporting voluntary personal accounts. That's up from 54 percent support in July 1999, when the Dow was almost 25 percent higher than today.

Despite the market, 55 percent of working-age voters think personal accounts are less risky than the current system, which can remain solvent only with substantial tax increases or benefit reductions. By a two-to-one margin, likely voters think the lesson of the Enron scandal is that workers need more control over their retirement savings, including personal accounts for Social Security -- not that markets are dangerous and that accounts shouldn't be allowed. Individual control is a recurring theme: Voters cited it as the main reason for favoring personal accounts, even over higher benefits and the ability to pass on the account to their heirs.

An idea shows its strength when times seem the toughest. For a proposal to let workers invest part of their Social Security taxes in the stock market, these would seem to be tough times. But even today, personal accounts would increase Americans' retirement income. And even today, Americans support them.

Social Security reform opponents crow that personal accounts would have lost billions in the last four years. What they don't mention is how much workers would have gained over the past 40 years. Not just in dollars, but in control, ownership and personal security.
Other Concerns, Community and Low Paid Workers:

Community Toolkit Cato Institute 2005

Our country is about to embark on a great and important debate: how to reform Social Security, the largest government program in the world. Reform and restructuring is required to enable this federal program to provide each one of us with the benefits for which it was created back in 1935. Because the fact is, a change in the demographics of our country is necessitating significant restructuring of this mammoth contributory program or it will go broke by 2018, just 14 years away. Simply put, the system's finances are not sustainable as it is currently designed, which means our citizens will not get the benefits they expect.

Spin
In Cato's Community Leaders Guide to Social Security Reform, you will find many answers to questions that you may have been asking about this issue, or have heard from your associates or constituencies. You will find an exciting, viable alternative to our current system, one that has been adopted by several other countries-personal accounts. It is an alternative that addresses the financial weaknesses inherent in the current system. And, it also offers us a chance to amend the inequities that have historically existed within the Social Security system that unfairly penalized workingwomen, divorcees, African Americans, and younger Americans. A new system is possible that includes ownership of retirement dollars for every American citizen and the opportunity to pass that individual wealth on to their children.

The Impact of Social Security Reform on Low-Income Workers

by Jagadeesh Gokhale

Jagadeesh Gokhale is a senior economic adviser with the Federal Reserve Bank of Cleveland. The opinions expressed herein are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Cleveland or of the Federal Reserve System.

Executive Summary

Because the poor are disproportionately dependent on Social Security for their retirement income, they will be among those most affected by any reform of the troubled retirement program. Traditional reforms, such as raising taxes or cutting benefits, will leave low-income workers worse off. However, allowing workers to save and invest a portion of their Social Security taxes in individual accounts may avoid or offset potential benefit cuts, without increasing taxes.

Spin

Equally important, individual accounts may provide an opportunity to address some of the other problems with the current Social Security system, in particular its impact on wealth accumulation, the intergenerational transfer of wealth, and the inequality of wealth in America.
Poor households currently save very little and therefore own almost no financial wealth at retirement. As a result, the distribution of bequeathable wealth among retirees in the United States is highly unequal. There is strong evidence that Social Security may be contributing to that inequality. In contrast, a system of individual accounts would allow workers to accumulate real and bequeathable wealth, leading ultimately to greater overall equality of wealth. Social Security privatization therefore becomes the truly progressive option for reform.