Walter Rhett

Why the Vote on Healthcare Repeal is a Vote on Social Security

In Living, National Affairs on January 19, 2011 at 3:46 pm
McIntosh County, ND School and Polling Place, 1940
McIntosh County, ND School and Polling Place, 1940

The idea of a safety net or programs for the poor is a strange tale of a long ago American government, now out of fashion. Strong political forces and bad arguments are aligned against the poor. Unorganized, they are easy political targets. Unemployed, they enable labor costs to be shifted to the Far East or shifted to the government to carry those out of work.

Unspoken in the dismantling of the safety net is an inner logic that drives the symbolic votes to overturn healthcare reform. This healthcare repeal vote is a practice run, a part of a grand effort to ease the path for the permanent removal of social security from government control. Strong political and private forces are after the flag of this enormous pot of public gold.

Healthcare

Again, for the strong forces, healthcare is only a pawn and the vote to repeal is a staged dress rehearsal. Industry lobbyists have not pushed for healthcare repeal, hospitals and big pharmaceuticals love it, doctors can live with it, and private insurers will gain millions in new policy owners. Stakeholders, especially the elderly, will not surrender its benefits. It trims the deficit. It’s easy to run against and misrepresent.

Moreover, the 14th amendment, with its equal protection clause that protects rights from being abridged by the states, guarantees that all persons have “full and equal benefit of all laws and proceedings for the security of person and property.” Despite the multiple legal actions brought against mandated coverage, the 14th powerfully supports its constitutional authority and is thought to be more pertinent than the 10th amendment’s commerce clause, with its “necessary and proper” argument. Put the 14th’s equal protection together with the 5th amendment’s due process clause and the tandem makes it difficult to overturn mandated coverage on constitutional grounds.

Bad arguments abound regarding healthcare mandates and entitlements, all seemingly blind to their poor logic and to the transfer of wealth to the rich. Of the “wasted” stimulus which saved your child’s teacher’s job, two thirds went to states to make up budget shortfalls for essential services. Another view contends we can’t endlessly fund the poor, yet ignores we seem endlessly willingly to fund the rich with tax cuts and fund out of date weapon systems and finance wars. In the middle, hidden in plain sight, are arguments that vilify social security on fiscal and ideological grounds. Calling social security an “unsustainable tsunami” “threatening to bankrupt the nation” (when linked to other programs with guaranteed access like Medicaid) on its website, social security is starting “to show its age” a Heritage Foundation paper argues.

What many see as a safety net and others as a bankrupting hand-out, some re-vision as the last great pot of wealth in peace time, a prize to be gained without producing anything more than a good public relations campaign and a few changes in congressional votes. The spin wars of actuarial tables and ominous projections of the trust going bankrupt conveniently conceal the fact that the fund as of September 2010 currently contained $2.6 trillion. That’s right. This “bankrupt” fund contains $2.6 trillion, up from a mere $47 billion in 1986, and is still growing quarterly in net assets.

Old-age and Survivors Insurance Under the Social Security Act. Every man wants security and happiness for his family. Wage earners covered by the Federal and Old-age Survivors System can look forward. Circa 1942. Library of Congress.
Old-age and Survivors Insurance Under the Social Security Act. Every man wants security and happiness for his family. Wage earners covered by the Federal and Old-age Survivors System can look forward. Circa 1942. Library of Congress.

The fashionable goal this season for some inside and outside of government is to place this treasure trove of public wealth into private hands. They intend to use government’s authority to collect taxes to act as an agent to transfer the taxes into private accounts. Consequentially, private companies will be flush with vast windfalls and steady streams of capital gratuitously redirected to those who have done nothing to earn the fruits of workers’ labor. Additionally, the companies will be enriched by management fees and emboldened to take risks that have nothing to do with the social security safety net than derivatives had to do with mortgages.

Under this scenario, the government is taxing workers and extracting capital value to be handed over to private corporations. Supposedly these corporations will manage these tax funds in workers’ interests, but workers assume all the risks. Sound like Big Brother, big government? $2.6 trillion and rising is a big deal.

So the health care repeal vote is an exercise in creating a mind set that nothing the government provides has a sacred trust with the people. It’s a test drive that helps solidify the thinking that anything the government does for everybody is an entitlement or a tax, a give away, a transfer of wealth, an intrusion, an imposition of liberty. By default, the failed vote successfully brands the common good of collective action and safety nets as examples of the yoke of tyranny.

The Republican Strategy

Apart from the repeal vote, Republican strategy includes three action points, outlined in the Republican Party national platform. The first is a commitment that nothing will change for the 51 million people who currently receive social security and disability benefits. The promise not only protects these national stakeholders, it neutralizes them politically. Promised no impact on their benefits, many current recipients will sit on the political sidelines as major program changes are made. Politically they act as a buffer for the wholesale overhaul planned for the system by the other action points.

The second action point is the Republican mantra, the promise of “no tax increase.” (Yes, but it doesn’t say “no cost increase;” more on that later.) First, this point stakes out the revenue the account would receive by simply raising the income ceiling limits above $106,800–which caps the tax at $6,621,60, no matter how high a person’s income. Raising the cap would bring in new revenue, but would be labeled as a tax increase by Republicans. A Heritage Foundation paper argues via an emotional appeal that raising the income limit to $140,000 would cause families to “suffer.” It does not comment on the effect on families at or below the current income limit of $106,800, whose incomes carry the full weight of the tax.

The third action point is the heart of the Republican sales pitch. It cleverly eases social security away from being a government run program by making the government’s taxing authority into a transfer agent for “choice.” Under “choice,” workers could chose to have taxes paid into the federal system invested outside of their government account.

 But the Republican proposal for “choice” increases government costs. “Choice” would create more layers of expensive bureaucracy to track and manage those individual accounts invested outside. These include costs for collection, eligibility, enrollment, processing, and oversight of funds in private accounts. Of course, there will be a blizzard of ads hyping a confusing range of options, and the costs of employee education picked up by the government are also hidden in the word “choice.”

 In essence, the government picks up the massive overhead costs of collecting, processing, and managing the administration of the outside funds–leaving private sector accounts with substantially lower overhead and a titanic tsunami of new funds every quarter. And these funds are portable, remaining on the books of companies for thirty years or more, no matter the workers job history.

 To review, the Republican trinity on social security is: nothing changes; no increases; and we are adding choice. Its real goals are to minimize opposition, block alternative solutions, and create an massive, unprecedented transfer of government tax authority into private hands, where the appropriated funds will be set aside to be used in private ventures and private investments without oversight for decades.

 Social Security

 Established in 1935, the New York Times says Social Security has been “the centerpiece of the nation’s social contract, an inter-generational commitment . . . the most universal and the most popular.”

What does social security provide? From the Congressional Budget Office (CBO) website: “ . . individuals received payments from the Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds in the form of retirement income, spousal and family benefits, survivor benefits, and disability benefits.”

 The CBO defines Social Security as “a defined-benefit system, with benefits calculated using a formula based largely on previous qualified earnings. That implies that beneficiaries have no choice of different types of assets within the system; the only “asset” that participants hold is the promise of future benefits. That restriction simplifies administration.” Social security has a specific tax dedicated to its revenue stream that covers its costs.

 According to a detailed CBO analysis, the higher levels of service and different tasks demanded by offering private accounts will increase costs to both the government and the worker. At present, social security accounts have low administrative costs and do not incur any transaction costs. For certain forms of private accounts, the CBO estimates administrative costs could increase ten times the present level. Moreover, for the worker, the administrative and management costs on smaller accounts amount to a retrogressive tax. Even charging the same flat fee will cost smaller accounts a greater percentage than larger ones. These fees will lower the accounts growth and return rates, unlike the present system.

 Thrift saving, mutual funds, and private-defined contribution plans are three popular private retirement programs the government has broad experience in administrating and coordinating and the government has accumulated accurate data on their direct and indirect costs. By every estimate, the costs are higher and the risks are greater if social security funds are put in these private accounts. The risks assumed by the workers include unforeseen dangers: long periods of market volatility or stagnation, no guaranteed return, emergency withdrawals that drain the account, exhausting the account funds before death. For example, in the 15 months before October 2008, Americans lost $2 trillion in private retirement savings, the CBO reported. Individual accounts dropped as much as forty percent.

 In assessing any proposal or change, it is important to ask, “who benefits?” If the Republicans get the cuts they have been “fighting for,” the only sure winners will be the private investment and financial companies and outside management firms who will reap a bonanza without the gauranteeing the returns based on contributions that is a part of the current system.

 Despite the political spotlight, in fact, the budget is in no danger from social security and social security is no danger to the budget. To sweep social security into the crisis of deficits and run away spending links false causes; remember social security has a fund surplus of $2.6 trillion. The problems with social security lie not in the budget, but in the nation’s demographics; the number of people living longer collecting benefits; the numbers of workers paying. To fold social security in with pentagon spending or health care costs is a hasty generalization and a false dilemma.

 Such thinking, reinforced by the symbolic vote, makes it easy to go after social security. The health care repeal vote demarcates, in some political narratives, a historic watershed of resistance, a rallying cry of legislators rising up to return to founding principles (very much it fashion among some groups, especially when revised before reading!). But the well rehearsed rhetoric of lofty sentiments hides the vote’s true intent: the vote is not a gladiator call for freedom. It’s an attempt to abridge our security because strong political forces have their eyes on another, extremely lucrative prize.

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  1. This is one of your most powerful pieces to date–indeed, every vestige of grass roots action, every once-inspiring phrase (“eyes on the prize”) for unity, organization, and struggle, has been yanked from our mouths and devoured by the slick, unyielding public relations machine that lines up its dominoes, strategically purchasing only the minimum number of politicians necessary to achieve its heists on our public good–both our funds and conscience…

    If there are a handful, or 20% of politicians who appear _not_ to be bought, but vote their conscience, such appearance serves these corporate oligarchs well too…because it creates a greater guise of “democracy” instead of totalitarian corporate control with 100% obeisance…even though, effectively, that IS what we have, with the window dressing of dissent and congressional resisters that provide perfect cover for these corporate looters to claim no wrong-doing—they innocently proclaim they simply stand for the majority opinion in an otherwise vibrant democracy that protects all thought.

    I go through moments of emergency and dreams of exile somewhere, though there is no longer a Statue of Liberty waiting on any far away shore anymore….The impending doom of social security is the next domino after the passage of the tax cuts bill…there was no reason to lament the loss of Russ Feingold from the senate, because he was just providing cover to these derivatives spinners who masterfully make our puppet government dance to their design…He, like us, can maintain more integrity outside of government….

  2. Canada!Read Ishmael Reed’s Flight to Canada,” a novel about escaping “slavery” as a metaphor. Also for hilarity and engagement, the novel, “One Hundred White Women.” American Indians request 100 white woman due to deaths from treaty violations. And the government sends them! Thanks for your appreciation of the craft and of the ideas. The 5th and 14th amendment clauses are powerful, new data. My favorite,Strong political forces and bad arguments are aligned against the poor.

  3. I just read your post on the NYT’s comment section. Excellent. I’m glad I found your blog. I wish the NYT opinion page would replace one of its stale, musty voices with your clear, well-argued fact-based, intelligent opinions. Thank you.

  4. Nell, thanks much for your comments. Didn’t you know? That’s why the Times sets up a surperb forum for us to comment. Supposedly liberal, they get our best work for free (!), ease over their weaknesses with team strength in the comments, which, thankly Times readers appreciate without regard to status or media fame. So my dirty little secret is the Times is another big business holding down employment, exploiting workers while appearing as nice as those irritating “I work for Wal-mart” ads I see. Of course I have no facts or this, but I’m sure Beck will give me time to sprout my conspiracy theory, since I write 20+ comments a week, from national affairs to sports, many Times highlighted, and don’t even get a mug or tee shirt! So why do the 20 or so of us who comment regularly (Karen Garcia is my favorite), who stay up late, wait on the post to appear (never at the same time!), dash off swiftly written prose to get to the front of the pack (no one reads you if your comment #379!),–why do we do it? Two reasons; one, the Times is the most widely read newsite in the world, averaging 3 million readers a day. That recommend button is a shot of adrenaline. To watch the clicks go up is like making a game winning 3 point shot or a corner fade, except it happens over and over each time someone clicks recommend. Two, writers live for good sentences and thank yous. . . So, you have made my day! (The earlier section is a parody, of course; just practicing my spin!) Thanks again.

    • I hear you. I post there most days myself. (The highest number of clicks I’ve received so far exceeds 300.) Clearly, people are thinking deeply about so many issues. In this age of truncated, chronically misspelled text messages, it’s refreshing to scroll through NYT comments to find excellent writing. I’ve been hoping that Charles Blow and Bob Herbert would take a little sabbatical. I’ve become increasingly irritated with them. Maybe they could take Krugman with them.

      I posted your comments to my Facebook page so that my 25 friends could read it. I hope they’ll find their way to your blog. Take care.

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