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Published on 29=20 Mar 2005 by Scoop. Archived on 30 Mar = 2005.

US: The Social Security Scam And Debt Bomb

by Michael Hammerschlag

RELATED NEWS:

Rethinking the=20 Axis of Oil...

2041...=20

Stubborn=20 GM engineers its decline...

How to=20 deceive friends and influence people: Oil crisis = lies...=20

Will=20 Higher Oil Prices Fuel Inflation?...=20

Worried about the depletion of the Social Security Trust = Fund,=20 that carefully preserved safety net you=92ve been paying = into since=20 forever? Don=92t. It doesn=92t exist. In = the early=20 80=92s, Congress, dealing with the consequences of = Reagan=92s monster=20 deficits, decided to spend what was left of it and replace = it with=20 IOU=92s in treasury bonds. Paul Solomon of PBS=92s = Newshour =20 showed the crummy 1 story cinder block building in = Parkersburg, WV,=20 where it is now housed-1.4 trillion dollars in bonds=20 in a single file cabinet. We owe you $11 billion, $9 = billion,=20 etc. Social Security is now a revolving program- the funds = paid out=20 to the elderly come directly from the FICA payments of = current=20 workers via general revenues, and the excess is used to hide = the=20 real deficit. Democrats don=92t want to talk about this- = afraid it=20 would alarm voters already inundated by the Privateers = alarmist=20 propaganda, while the President just did, angling for the = same=20 thing.

This is the central lie of the Bush = privatization=20 program: they won=92t =93let you put your money to work=94- = there=20 is no money in cash- so the Bushmen will have to = borrow it=20 from foreigners. The stability and reliability of Social = Security is dependent on the stability of general revenues = so the=20 real threat to it comes from Bush=92s reckless deficits- now = maybe=20 $640 billion including all the off-the-book spending and = borrowing=20 in SS, debt interest, etc.. In borrowing to pay into these = private=20 accounts, Bush will jack up the deficit another $200 billion = every=20 year (some estimates are $100 billion more). So to get the = supposed=20 6.5% historic return (after inflation) in stocks, we will = borrow at=20 3-10% and pay forever (10 yr treasuries now pay 4.4%). From = the=20 Japanese, Communist Chinese, and old Germans. Instead = of=20 making Social Security solvent, that will undermine its = foundations,=20 and reduce its benefits. Bush wants to take money out of the = SSS at=20 both ends- young and old. Like burning a candle at both = ends- it=92s=20 not sustainable.

Which is the second problem. The = world only=20 buys our treasury bonds because the dollar was stable and = strong.=20 With Bush=92s conversion of our greatest surplus into = our=20 greatest deficit, the dollar is crumbling: A Dollar was = worth only=20 .73 Euro at the New Year instead of the E1.19 it was 3 =BD = years ago-=20 a 38% drop in the power of our money and the value of = the $11=20 trillion dollars of the American Dream that our creditors = hold. All=20 they have to do to provoke a worldwide economic crisis is = just buy=20 Eurobonds rather than ours (forget selling ours). = That=92s=20 started, with the South Korea talking of diversifying = their=20 holdings, Putin threatening to switch its trade in oil from = dollars=20 to euros, and the Japanese warning of =93enormous capital = flight=94 from=20 the dollar. Once the image of American financial = invincibility is=20 breached, flight from our bonds could become a flood. To = keep=20 countries buying, bond interest rates will have to be jacked = way up-=20 causing interest rates to rise across the board, and causing = an=20 avalanche of bankruptcies by firms and people bloated by = cheap=20 credit. And if the =93full faith and credit of the United = States=94 that backs the bonds that obligate us to pay = Social=20 Security isn=92t dependable, as Bush keeps implying, why = on earth=20 should foreigners buy them?

These bond purchases = give=20 China extraordinary power over the US. Like a Las Vegas = casino, they=20 hold our markers and can = devastate our=20 economy by calling them in at any time. Emboldened by = that, they=20 just passed a law that specified an invasion of = Taiwan if=20 they declare independence. Clinton sent a task force to = patrol the=20 Taiwan Strait when China fired missiles into the ocean only = 22 miles=20 from Taiwan=92s ports in 1997 (Dragon=20 Rising); but our freedom spewing President has been = mute in=20 response to this thuggish escalation.

And the market = isn=92t=20 any sure thing, despite the long term rises- I=92m pretty = bright but=20 managed to lose a good bit of money on stocks that became = worthless=20 (see Rhythm). It=92s still 59% down from its high point in = March 2000,=20 and took until 1954 to recover from the crash of 1929; till = 1972 to=20 recover from the recession of 1964, according to = Newsweek's=20 pithy Allan Sloan. "I think the $2 trillion [cost of=20 privatization over 10 years] is way way understated. = I think=20 the 20 year estimate was $6.5 trillion," [for an average of = $325=20 billion a year]. "Dishonesty and nonsense is what the Bush = people=20 are about in the areas I understand--numbers. What they do = is ignore=20 the war in their projections, say that things are getting = better,=20 which they aren't, then tuck in the war numbers later." And = the=20 management fees will take a chunk out of any profits. Some = do think,=20 however, that devaluing the dollar is a good thing, and = would help=20 our atrocious balance of trade- now topping $700 billion, = though the=20 38% drop hasn't changed anything so far.

SS = Privatization=20 has nothing to do with saving it- it is a scam engineered by = people=20 who have long disliked it and want to grant more windfalls = to their=20 financial sector friends: management and setup fees and = bottomless=20 investment capital. A mild tweak in retirement age, income = cutoffs,=20 or benefits is all Social Security needs. Don=92t listen to = all the=20 Administration=92s dire warnings- Social Security isn=92t in = any trouble=20 for decades except from Bush=92s deficits, and the way to = deal with=20 that is to cancel the $3 trillion of tax cuts for the = wealthy.

~~

Michael Hammerschlag's commentary = and=20 articles (http://HAMMERNEWS.com) have = appeared in=20 Seattle Times, Providence. Journal, Columbia Journalism = Review,=20 Hawaii Advertiser, Capital Times, MediaChannel; = and=20 Moscow News, Tribune, Times, and Guardian. = He's been=20 a TV reporter, foreign correspondent, and produced = documentaries=20 over 25 years. He spent 2 years in Russia as the empire = collapsed,=20 where he witnessed the total decimation of the=20 economy. =20 hammerschlag@bigfoot.com

~~~~~~~~~~~~~~~ Editorial = Notes=20 ~~~~~~~~~~~~~~~~~~~

The BBC also published an article = last=20 week entitled UK debt is at 'time bomb' levels, = archived here=20 at the PowerSwitch website:
www.powerswitch.org.uk/portal= /index.php?option=3Dcontent&task=3Dview&id=3D530&Itemid=3D2

Peak=20 Oil may serve as a catalyst to bring about what Morgan = Stanley chief=20 economist Stephen Roach referred to as 'economic=20 armageddon.' This may in turn be an opportunity if we = are=20 prepared for it. In crisis there may be an openess to the=20 implementation of sustainable economic models (as for = instance=20 proposed by FEASTA).=20 Economic instability may bring the crises of Peak Oil = forward. This=20 almost premature crisis gives us the possibility that more = of the=20 world's remaining fossil fuels might be used to build more=20 sustainable infrastructure. Although that too may require an = alternative, counter-cyclical monetary system to finance=20 it.

One other note (a fairly obvious one): the US = President=20 unfortunately is not in any moral or legal position -- as = this=20 article might seem to imply -- to condemn a Chinese invasion = of=20 Taiwan, given his own record of disregarding international = law to=20 invade=20 = Iraq.

-AF

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~= ~~~~
Original=20 article available=20 = here.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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