Taking the security out of Social Security
The Bush administration is pressuring Congress to “reform” Social Security by giving wage-earners the option of investing a portion of their payroll deduction in a private retirement account. But what is to protect participants from seeing their savings wither as a result of a bad turn in the stock market?The Bush plan is based on the premise that the stock market will always be as it always has been, and that it will always bounce back. But is that a safe assumption for those investing for their retirement? There are some serious storm clouds on the horizon which threaten that assumption.One is our skyrocketing national debt, which was $2 trillion in 1986, $4 trillion in 1992, $6 trillion in 2002, and may reach $8 trillion as soon as next year, with no end in sight. Bush’s privatization plan will pile another $2 trillion on top of that debt. How long can this go on, and what will happen if foreign investors, who fund a significant portion of this debt, decide to pull out? Our only recourse will be to increase the rate of interest we pay on our debt, and that added interest cost will become an increased burden on the American taxpayer.Another (which may be an even bigger) threat, is our out-of-control trade balance – the difference between what we buy from other countries and what they buy from us. For nearly 100 years, starting in 1880, our trade balance was positive; that is, the United States sold more abroad than we purchased. Since then, our trade balance has been negative, and steadily increasing. Ten years ago, when it went over $10 billion per month, it became a matter of concern. Now it has gone over $60 billion per month – nearly $750 billion a year. These are American dollars being shipped to other countries, primarily China, which can use them to buy American assets, including manufacturing facilities and service businesses such as banks. In time, we could become a colony of overseas owners, who will reap the profits generated by Americans working for them at wages which will have to be competitive with those in emerging and third-world countries.And then there are our porous borders, which allow a massive influx of unskilled cheap labor. This drives down wages for an entire segment of working Americans.Finally, there are the effects of rising U.S. and world populations, and the industrialization of China and India, on the demand for (and cost of) energy and all other natural resources, and the financial impact of global warming and rising sea levels.What other result can these conditions produce than to reduce the standard of living in the United States, turning us into a two-class society, with a small, extremely wealthy upper class, and a lower class made up of the rest of us, much as we see today throughout South and Central America. This is also likely to depress the American stock market, making a private retirement account based on the value of stocks a losing proposition.The Bush administration’s concern should be focused on these problems, and Medicare, which are with us right now and are far more critical than trying to fix (with potentially disastrous results) a Social Security problem which is decades away, and can readily be fixed with some fairly simple adjustments. It makes you wonder what the administration’s true motivation is, particularly when the White House admits that its privatization plan will not remedy the future Social Security shortfall, and a similar plan in Great Britain has been a dismal failure. It sort of reminds you of the delusory reasons given for our going to war in Iraq.Glenwood Springs resident Hal Sundin’s column runs every other Thursday in the Post Independent.
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