The following article appears in Proletarian Revolution No. 75 (Fall 2005).

Social Security under Attack

The Bush administration has stumbled badly in its campaign to dismantle the Social Security system that has been warmly supported by the American working class for decades. Bush made his privatization scheme the top domestic priority for his second term, confident that it could be steamrolled through Congress by a sales pitch delivered to the public. Instead, the proposal met popular opposition, particularly from the working class and poor. And in the aftermath of the devastation of Hurricane Katrina, Bush’s plan is going nowhere.

But this is no reason for wild celebration. The mass opposition has been mostly passive in nature, and Bush & Co. have not given up. Moreover, a genuine crisis is brewing over how Social Security can be maintained. Bush’s assault has laid the groundwork for alternate methods of attack by its supposed defenders in the Democratic Party. And the existing system itself, as we will discuss, is riddled with fundamental class flaws.

The Program that “Works”

Social Security was conceived as part of the package of New Deal legislation in the 1930’s under pressure from mass upheavals, and over the years it has appeared successful by almost all capitalist standards in its manageability and service as a significant social sop. Its functioning is pretty simple: its funds come from payroll taxes and are primarily disbursed as income for retirees and disabled workers, along with their spouses and children. It requires relatively small administrative costs and leaves less room for fraud at all levels than other governmental programs. It has paid for itself. Its spread over a broad section of the working population underlies its popularity and has prevented it from being a target of racist backlash like the welfare program. And it does go a way towards providing minimum allowances for retirees. In short, the program “works.”

Even so, it operates within a capitalist system in deep stagnation and under a ruling class determined to maintain its profits regardless of human cost. A major worldwide depression has been averted only through a protracted and ever-deepening attack on the international working class and oppressed peoples. This has been evident enough in the U.S., with speed-up and the cuts in wages and benefits of employed workers. But there are other points of assault, including the “social wage” through which workers and the poor are sustained in ways which are not provided by private employers. The government programs which provide such services have over a long period either been shredded (e.g., welfare), reduced (unemployment benefits) or threatened (Medicare) by Republican and Democratic administrations alike.

Until very recently, Social Security seemed untouchable; even the Gingrich-led Conservative “revolution” of the 1990’s steered clear. But the rightward drift of American politics under the free enterprise banner emboldened Bush and a section of the ruling class. During his first term Bush was already speaking of the supposed benefits of privatizing the system. But then such talk was devoid of any details. Once into his second term, however, Bush’s campaign began in earnest. He tried to whip up an atmosphere of mortal crisis. Early in the year he warned that by 2018, “you’re either going to have to raise the taxes of people or reduce the benefits.” School children were likewise cautioned: “The system will be bankrupt by the year 2040.”

In doing this, Bush was grossly distorting the projections of Social Security trustees that in 2018, because of the growing proportion of retirees to active workers, the money paid out in benefits will begin exceeding the amount collected in taxes (thus cutting into the substantial surplus fund that has and is being built); and that under current formulas by 2042 benefits will start to be gradually reduced. While the ratio of retired to active workers is significant, to get a real sense of proportion note that in 1950, sixteen workers were paying into the system for every retiree drawing benefits, while by the mid-1970’s the ratio had already fallen to three to one. Yet, Social Security has been running a surplus.

Bush’s Flimsy Case

There is a looming crisis in Social Security, but it is on a far different basis than the falsified arguments of Bush. Its crisis, unlike the basket-case version promulgated by Bush, has far more to do with the crisis of society in general than the operation of Social Security itself.

From a false premise, Bush derives a false and cruel solution: privatization. Under his scheme, a significant portion of each worker’s payroll tax (some conservatives favor the whole thing) would be diverted into a private account, which could later be used for financial investments. The formal argument is that future retirees will then be free to invest much of their income where they wish – and that those investments will pay dividends which, combined with the “public” funds, would exceed existing payments.

Bush has played up the “freedom” angle to absurd extremes. For example, during the 2000 election campaign, he talked about how recipients could choose the “safest investment in the world,” U.S. government bonds. That of course is exactly how the Social Security surplus is now being invested! His real aim is to steer funds into the stock market.

More importantly, and this part Bush particularly doesn’t want to talk about, over time benefits will be severely reduced; that is, after all, the real reason for the proposal to begin with. And investments in the stock market can hardly be expected to compensate for those reductions. The argument for stock investments conveniently ignores the fees paid to Wall Street parasites, many of whom are naturally enough pushing for the proposed changes. Moreover, stocks themselves are wildly overvalued as it is. And the prospect for a sound capitalist future to back up investments is highly dubious. Thus Bush’s case is a house of cards.

Bush has a substantial history of relying on flimsy sales campaigns to back up his power plays. Even when the lies become public knowledge, as the case with the “Weapons of Mass Destruction” justification for the Iraqi war, he can blow the revelation off; the deed is done. But it has been different with Social Security. The public suspicion of his schemes was already sufficiently widespread, and it grew as details dribbled out.

Opposition is centered on the concept of privatization itself. The notion of turning over even part of workers’ savings to financial interests is a frightening thought. Even conservative backers of the plan recognize this: the Cato Institute, for example, renamed their privatization plan the “Project on Social Security Choice.” “Privatization” is becoming the “p word.”

With their backs stiffened by popular opposition, Democratic Party politicians chose to confront Bush on the issue instead of their customary rollover. They have even been joined by a significant number of Republicans who fear the political fallout of trashing Social Security. Some Republicans have proposed a “lite” version of Bush’s plan. But for now, the proposal is mired in the “legislative process” with few prospects of any movement on it any time soon.

For all the Democrats’ opposition, workers should have no misunderstandings about their intentions or program. They offer no genuine defense of the existing gains, much less of fundamental interests of the masses. They represent a graveyard of mass aspirations and struggles, Social Security included.

Class Bias

Even as it was conceived, Social Security is not by any means a cut-and-dried gift to the working class. Tying one’s income to the amount taxed in one’s lifetime may seem a fair and reasonable policy, particularly since lower-income workers receive a benefit based on a higher percentage of their wages. But inevitably, as a program run by the capitalist state, major class inequalities are built into its operation.

To begin with, a large and growing proportion of workers are forced to work “under the table” or as “contracting” workers; they don’t pay the Social Security tax and will therefore receive no benefits. This is particularly true for immigrant workers who, predictably, have the worst and most dangerous jobs. But even those working within the system have the calculations stacked against them. For the simple fact is that those who get paid less for their labor will get paid less when they are no longer working. Those who generally have less or no other means to fall back on – e.g. pensions, insurance plans, investments or inheritance – will get lower Social Security benefits. Those who have been most ravaged by the physical and psychological demands of their working years will have less means to deal with the results of those miseries; and indeed tend not to live longer to collect more benefits.

A subordinate but truly revealing point is that no Social Security tax is levied on incomes over $87,900 per year. While social classes cannot be accurately defined by a given income level, that income roughly matches the financial divide between the bulk of the working class, on the one hand, and the bourgeoisie, professional classes, and truly aristocratic sections of the working class, on the other. It is as if a special and conscious demonstration has been given to the capitalists and its dependable allies that they will be assured of more than their fair share of compensation in old age. The actual process is not that conscious, but neither is it accidental: it reflects the political power and privileges of capitalism’s rulers and favored.

Democrats’ Deception

The class bias created and protected by the Democratic Party only promises to get worse as the fiscal problems with Social Security do intensify. The “demographic” factor – the increasing ratio of retired to active workers – is real, even if not by itself that big a deal and deliberately overplayed by Bush & Co. A more basic problem than that is the sorry state of funding for government programs in general, including those in far worse shape than Social Security. To be sure, Bush has aggravated this problem greatly with his tax cuts for the rich combined with the massive and growing costs of the Iraqi occupation. His proposal would aggravate Social Security’s problem, as funds are diverted into private accounts. The state debt will grow as the government borrows money to cover current retirees.

But the problem goes beyond Bush and his individual initiatives. As the capitalist crisis intensifies, the greater the tendency to exploit the masses, including through more attacks on the social wage. The Democrats and their ideological spokesmen well know cuts in Social Security will be made one way or the other. But with the system presently running a surplus, and anxious to score factional points against Bush, they avoid talking the issue up. Instead they whisper about the changes to come, like higher tax rates. (For that matter, a tax hike was quietly implemented in the early 1980’s, following recommendations by a committee headed by Alan Greenspan, who became Federal Reserve chief under Democratic and Republican administrations.) Extending the retirement age and cutting benefits are other options. This will no doubt be posed as the “soft” alternative to privatization or the open trashing of Social Security.

Privatization has been a key spearhead of the global capitalist offensive. But it has also become a flashpoint for an emerging backlash by the world’s masses against the offensive. Even in the United States, the heartland of privatization, the setback for Bush’s agenda may well represent the reversal of this drive’s momentum. Elements of the American ruling class have been emboldened – those who not only want to head off mass discontent but feel a more systematic, productive and competitive maintenance of the system will require more state intervention in social programs. How can this be reconciled with the continued need for stepped-up attacks on the masses? One way is through re-strengthened state programs that in various ways make greater demands on the masses; reduced benefits, more stringent qualifications, etc.

For such a strategy, the Democrats have proved themselves historically to be the more suitable political instrument than the Republicans. Their identification with New Deal and New Deal-type legislation plus their phony reputation for representing the interests of workers and oppressed minorities, make them better able to create, package and sell Social Security cuts. Thus protecting even the existing living and working standards of the masses requires a relentless struggle against their supposed defenders among the Democrats as well as the Republicans.

Revolutionists have a clear and forthright attitude towards Social Security and the attacks on it. We are tenacious defenders of past mass gains as they undergo attack from the right and the ruling class in general. This is despite the various distortions built as a matter of course into such concessions under capitalism.

At this time, revolutionists (and even leftists in general) do not have the numbers or influence to successfully defend Social Security, either by their own efforts or by their ability to mobilize mass opposition. However, the leadership of the trade unions, as well as leaders of organizations of oppressed and poor, are in such a position. For example, by now they could have called out the ranks for a massive demonstration against the attacks, under the demands: Defend Social Security! Defeat the Bush Plan! No Cuts! This is, after all, what the leaders of both trade union factions claim to stand for, and the issue is certainly popular with the ranks. Such actions could be major steps towards building a serious defense.

The fact that the union leaders have taken no such steps is a sad reminder of their resistance to virtually any kind of mass mobilization, even over issues they say they support. They are too busy lobbying Congress and greasing the palms of Democratic politicians – their version of “mobilization” – and at any rate do not want genuine mobilizations to become a habit lest they be used against themselves and their friends in the capitalist parties. And they may well be looking down the road to the time when they feel obliged to compromise their position against cuts, particularly when the Democrats themselves will be proposing them.

Even while defending the existing program, Marxists are open about all its problems: its limits, its class bias, the inevitability of further capitalist attempts to reduce or destroy it. We argue that only a revolutionary workers’ state would make possible a truly humane approach to caring for the aged and disabled.

In the society run by the workers, there will be a clear need for a common fund for the aged and disabled, provided for by the productive portion of the population. In that sense, social security will remain, even with the overthrow of capitalism. What will be radically altered is the class discrimination in the collection and dispersal of funds. The proletariat would immediately impose a truly progressive tax and benefit structure that begins to level the playing field. This would come in tandem with the leveling of incomes in general that will be taking place in society as a whole over time.

Even more fundamental for genuine care will be the growth of the productive forces, unfettered from capitalist relations. The massive social surplus created as a result will leave a far greater availability of resources for expanded care. Moreover, with changes in the work processes and the reduction of work time, there will be more opportunities for the aged and disabled to participate in productive activities, if they so desire.

All this is a long way off. But it still must be seen as part of the vision of what is possible once the capitalist rulers and their system are dispensed with. The Social Security fight could prove to be an important component in stemming the capitalist offensive.