As the president continues his supporters-only rallies across the country to revive his sagging momentum on privatization, the Privateers' arguments get more and more abstract and paranoid.

MYTH: There is no Trust Fund

Yes, currently, workers pay more than enough payroll taxes to cover the benefits paid out to retirees. In fact, there is a surplus that Congress borrows and spends each year. But this surplus turns into a deficit when the baby boomers retire en masse and on schedule. Soon more money will have to be paid out to retirees than is being paid in by workers. Where will the government get the money to pay these obligations? (Paul Jacob, "What, me worry?" Town Hall, 3/6/05)

It is, after all, your money - your FICA contribution to Social Security, 12.4 percent of your wages - and the government is not saving it on your behalf as it promised it would 20-some years ago when Congress raised the payroll tax rate for the 20th time. [...] When it's done paying current benefits out of your FICA contributions, the government raids the rest of the payroll tax revenues - the Social Security surplus - to pay for everything else from bureaucrats' paperclips to corporate welfare. The raid on Social Security revenues will end in 2018... (Jack Kemp, "Leave personal accounts on the table," Town Hall, 3/7/05)

Contrary to opposition arguments, the problem doesn't begin when the Trust Fund runs dry. The only thing that matters when it comes to paying benefits is cash-flow. Since the bonds in the Trust Fund are not really system assets but actually are accumulated obligations, Social Security's real problem begins in 13 years -- in 2018. (Sean R. Tuffnell, "Preparing for a tough fight," Washington Times, 3/4/05)

The fiscal realities of the social system are no secret. There are no funds to pay obligations at retirement for today's young workers. (Star Parker, "Why is the NAACP against Social Security reform?" Town Hall, 3/8/05)

REALITY

This is most persistent of deceptions around the privatization case. Back in '83, Reagan's Greenspan Commission raised the payroll tax to save up Social Security funds to pay for the Baby Boomers' retirement. Today, the trust fund holds about $1.5 trillion in U.S. bonds, and this stockpile will continue to accumulate until 2018 or 2020. After that, as planned, Social Security will draw on the Trust Fund to help carry us through the retirement boom -- even if no changes at all are made to the system, and even if the economy's growth stagnates at 1.9%, the Trust Fund is projected to last until 2042 or 2052, paying out generous benefits. (After that, the pay-as-you-go system will pay 70-80% of promised benefits -- still more than today's retirees receive.)

So when Privateers threaten you with impending doom in the year 2018, make sure you hear them loud and clear: they are talking about the United States government defaulting on Treasury bonds. Unthinkable. (This week, our government put up a state propaganda website repeating this threat.)

If Privateers foresee a problem in 2018, then it is not located in Social Security -- a system which has wisely saved for the last twenty years. No, the problem is with Bush's fiscal insanity, pushing our country into massive debtorship. You might as well ask where the military plans to get any money in 2018, when we will begin to have trouble making our interest payments.

MYTH: Government can welsh on Social Security

From the very beginning of Social Security, the politicians have been investing the system's surpluses not in profit-making enterprises, like insurance companies, banks, and even lawyers running old-fashioned tontines do. Nope, they've simply borrowed the money. They've "invested it" in spending. And soon those IOUs will come due. When that happens, Congress, which has trouble even approaching a balanced budget, much less running a surplus, will have do that very thing — run a surplus to begin paying off its biggest creditor, the Social Security Administration — or else do precisely what Samuelson suggests, cut benefits drastically, or else raise payroll taxes going directly into Social Security. (Jacob)

The Social Security system does not offer a guaranteed retirement.  Congress may reduce or cancel benefits at any time.  Social Security’s only guarantee right now is insolvency. (Lisa de Pasquale, "NOW is on the wrong side of the Social Security debate," Town Hall, 3/8/05)

Retired Americans can draw Social Security benefits, but they don't own them, and it chafes. Many retirees insist that they earned these benefits, but in the current setup, that's beside the point. Congress may change benefits at will, and has done so in the past. In the resistance to means testing Social Security, we see an entire political class trying to maintain the fiction that this is a meritorious retirement program, not a redistribution scheme. (Jamie Dettmer, "Social Security reform," Washington Times, 3/8/05)

REALITY

For seventy years, the government has managed a unique, multigenerational exchange -- if we work hard and pay to support an older generation, we are promised the same kind of adequate support when we retire, paid for by the younger generation, and so on. It is not a business contract, or a typical investment. It is a kind of social insurance, so that no matter how our fortunes turn out, when we can no longer work, we can rest secure that we will live out our days with dignity.

Privateers have spent years sowing distrust in this system, which in their anti-government ideology is morally wrong. As Robert Scheer put it: "The problem with Social Security is that it isn't broken, which is precisely why the President is so eager to destroy it. It is the continued success, rather than failure, of the program that irks him." That is a debate they have lost -- Social Security is probably the most popular and successful government program in history. Can the government welsh on the promise of Social Security, a promise the American people want to keep? Not an honest government.

Make no mistake, even as they hold told this threat over our heads, it is the Privateers themselves who are selling such a betrayal.

MYTH: Privatization is good for poor

NAACP leaders are saying that personal retirement accounts are "dangerous," and yet they choose to not mention the major dangers to which low-income workers are exposed by not having Social Security changed. (Parker)

Poorer workers would be able to accumulate inheritable wealth the same way their wealthier counterparts now can, by setting aside some of their payroll taxes. Memo to Republicans: You're on the side of the poor and downtrodden; advertise this fact. (Dettmer)

REALITY

Privateers -- friends to the "poor and downtrodden"? Yeah, right. Creating private accounts by carving out a piece of the traditional system will carve out the protections built in for low-income workers.

The main protection is the progressive benefit formula, which replaces a higher proportion of a poor worker's income than a rich worker's. Quoting the Center for Economic and Policy Research: "Social Security benefits are highly progressive, so that low wage workers get a much higher share of their wages in benefits than do high wage workers. A worker who earned $10,000 a year during their working lifetime can expect to see a benefit that is equal to approximately 70 percent of their average wage. A worker who earned $36,000 a year will get a benefit that is equal to approximately 40 percent of their wage, while a worker who earned $50,000 on average will get a benefit that is equal to 35 percent of their wage."

With private accounts, however, the government cannot define the market returns as it defines the benefits in the traditional system. (This is the fundamental difference between a defined benefit program, like Social Security, and a defined contribution program.) You put a certain amount in the market (an amount which will be smaller the less you earn, of course), and you get back, well, whatever. It is fundamentally luck.

And low-income workers are almost guaranteed to be less lucky than the better-off, because those without extra savings or pensions need to invest their private accounts in the least risky investment possible. If you are well-off, and you have a diverse retirement plan, then indeed, you are likely to gain from taking risks in investing (there is no guarantee). But if you are depending on Social Security entirely for your retirement, then you need to make sure you will have enough, and you must sacrifice the slot machine for the piggy bank.

In Bush's privatization plan, there are a few options with varying risk. Lower-income workers should choose the lowest-risk plan, which is simply government bonds. But wait! When you retire, Bush's plan carves out an amount from your traditional benefit supposedly equivalent to the same (3%) bond investment. Net difference, they say, will be 0.

Unfortunately, for the poor, it may not be. While the traditional system defines benefits progressively, giving proportionally more to lower-income workers, both the "private account" investment and the carve-out (or "clawback") are at a flat or unknown rate. The progressive part is gone. Thus, based on what we know so far about Bush's plan, a low-income worker will receive less than he does today.

This is all in the name of some vague notion of "ownership."

MYTH: Demonizing the opposition

NOW purports to speak on behalf of women and minorities, but how can they square that claim with their direct opposition to financial freedom for those very groups?  No one has proposed any measures that would harm women or minorities.  On the contrary, personal accounts provide an opportunity for greater retirement wealth that could be passed on to loved ones. (de Pasquale)

The NAACP was once at the vanguard of the civil-rights movement. That movement began because blacks wanted freedom. Yet blacks hear today from their leaders that they are incapable of being free, that they are incapable of taking care of themselves and their families, and that staying on the government dole is the only answer for them. (Parker)

During the President's Day recess, many members of Congress held town hall meetings and other events to try to explain why Social Security reform tops the national agenda. To no one's surprise, several members met with protesters and other activists dispatched from opposition groups. (Tuffnell)

The opposition to reform is in lock-step unity in its labors to sow fear, while the Republican Party has strayed off message and is publicly seen negotiating with itself about how to go about reforming Social Security. (Dettmer)

REALITY

It started with AARP -- wild, unrelenting accusations against the mammoth seniors' lobbying group. Now, Privateers have set their sights on, well, anybody else who speaks out against their plan.

Women depend on Social Security more than men do -- partially because they earn less and live longer. While private annuities punish women for living longer by reducing monthly payments, Social Security is gender-neutral. In addition, older women are helped particularly by spouse and widow benefits. From AARP: "Wives as well as divorced women who had been married to their ex-husbands for at least ten years are entitled to spousal benefits amounting to 50 percent of the benefits of their husbands or ex-husbands. Upon widowhood, they are automatically eligible for a benefit amounting to 100 percent of their current or former husband's benefit."

As for African-Americans, they similarly as a group earn less than whites, and thus depend more on Social Security in retirement. For one in three black seniors, Social Security is the only source of income.

Privatization offers real cuts for women and minorities, in return for the "opportunity" to win or lose on the stock market. It's quite natural for the NOW and the NAACP to register their discontent. But instead, according to Privateers, these groups should be overcome by phrases like "ownership," "freedom," etc. -- meaningless words from half-baked philosophers.

As we and the rest of the "lock-step opposition" continue to answer empty rhetoric with facts, you can expect the campaign to demonize "opposition groups" to expand. But we think Privateers will soon find that opposition to phasing out Social Security includes nearly the whole country.