By NAT WEINSTEIN
President William Jefferson Clinton-better known in some quarters as “Slippery Willie”-once again stole the Republican Party’s thunder in his Jan. 19 State of the Union report to the nation.
Among a host of other “cures” for society’s ills, Clinton proposes to “save” Social Security pensions, Medicare and other related social benefits by investing $700 billion of the fund in the stock market over the next 15 years and $2.7 trillion down the road a piece.
The rationalization being peddled for this rip-off of Social Security funds is the alleged “bankruptcy of Social Security by 2032,” when the bulk of the current generation born after 1945 (the so-called baby boomers) have reached retirement age.
This rationalization is based on the allegation that (1) there was a $70 billion budget surplus last year. And (2) that budget surpluses will continue every year for the next 25 years, and by implication into the indefinite future!
That is an incredibly fantastic fairy tale. The fact is that budget deficitshave been the norm since the Great Depression hit 70 years ago.
The 1999 “World Almanac,” which records U.S. federal budget statistics from 1936 to 1994, shows a budget deficit for every year-with just one exception, in 1969. And to underscore the absurdity of predicting unending budget surpluses, is the fact of an ever-rising public debt of $5.6 trillion.
Thus, to talk about putting $2.7 trillion of imaginary surpluses into the stock market over the next 15 years is nothing less than a giant insult to the intelligence of the American people. What is really intended is to vastly increase the public debt to bail out corporate America.
In short, it’s a swindle in every sense of the word. The claim that investing this imaginary “surplus” will provide all kinds of benefits for workers, women, Blacks-and those youth who depend on the public school system for an education-is pure hogwash meant to beguile the innocent.
(No less ephemeral is Clinton’s call for raising the minimum wage by one dollar per hour. He knows he can count on his bipartisan Congress to empty all pro-worker promises of real content. The trick here is that some Democrats will loudly support some of the sugar-coating for his bad medicine, but only enough Democrats to make the record for the next election-not enough to enact the proposals into law.)
The only real substance in Clinton and Co.’s plans for the public school system is an acceleration of the trend toward its privatization (see article on page 5). Nothing good can come from this scheme. If implemented-and there is little doubt that it will be-it will destroy the entire Social Security system.
In a word, the intended beneficiary of President Clinton’s philanthropy is the rich, not the poor.
‘Friend’ and foe alike come aboard
Many so-called “friends of labor” in Congress have voiced opposition to Republican plans to privatize Social Security. Although Clinton’s plan includes privatizing only a “small” portion of Social Security funds, it can’t end that way.
Buying stocks and bonds at a time when even some of the most conservative economists say that the market is now at the height of a prolonged stock market boom means that when the bubble bursts, American workers will be left holding a nearly empty bag.
Nevertheless, the initial reaction to Clinton’s speech indicates that Democrats and other liberal capitalist politicians will do a flip-flop. Already, they are well on the way to dropping their pretense of opposition.
It’s easy to predict that they will go happily along with gutting both Social Security and public education as well.
Add that to the decades of declining real wages, and you’ve got the makings of a mass radicalization of the American working class that will make the one in the 1930s look like a honeymoon between workers and bosses.
It’s not hard to predict a gigantic steam roller for this so-called “social security solution.” Most, if not all, the liberals and the AFL-CIO bureaucratic hierarchy are ready to jump onto the stock-market-solution bandwagon.1
Clinton’s scheme is, of course, only one of many variations floated in the mass media. They differ from each other only superficially. Any version of this scheme can only end in the shredding of what’s left of the social gains won by working people in the course of the great labor upsurge of the 1930s and early ’40s.
For instance, the opposition to Clinton’s scheme voiced by Federal Reserve Board Chairman Alan Greenspan is mostly designed to maintain the illusion that the capitalist class is divided between “greater” and “lesser” evils ( but who needs evil?).
While there are real differences among capitalists on this and other matters, only very rarely are their differences substantial. And even then, the rule is that they never fail, when push comes to shove, to subordinate their differences and unite in defense of their class interests.
The fact is that Alan Greenspan did not oppose Clinton’s proposal to transfer 2.7 trillions of Social Security dollars to Wall Street. On the contrary, he merely opposed government control over these funds on the ground that it will interfere with the “invisible hand” of the “free market.”
Greenspan, along with Republicans and some Democrats, proposes instead to let workers invest their Social Security taxes as individuals-that is, extending Clinton’s proposal to only privatize a portion of the fund to the whole shebang.
An editorial in the Jan. 22 New York Times, one of the most authoritative voices of American capitalism, commenting on Greenspan’s objections to Clinton’s proposed $2.7 billion gift to Wall Street, serves to remove any doubts.
It makes clear that this trillion-dollar rip-off has the support of the entire capitalist class. This extract from The Times editorial sums it up:
As a matter of political reality, both [Democratic and Republican] parties appear headed toward investment of Social Security funds in the stock market, either by the system itself or by individual participants. Forced to choose now, we prefer Mr. Clinton’s approach to that of the Republicans. But Mr. Greenspan’s cautionary comments should be useful in framing the debate.
Some idea that harnesses the longterm strength of the stock market will very likely end up as part of the Social Security bailout.
Why the Wall Street bailout
The real purpose of the proposed “Social Security” solution is to keep the current overpriced stock market from utter collapse when the bull-market bubble bursts-as it must. Economic experts have been predicting with increasing trepidation that such a collapse in stock-market prices is inevitable.
Even conservative economic experts have expressed fear that a loss of as much as half the current value of stocks and bonds is likely.
Most, however, optimistically expect that after such a “correction” of “overvalued” stocks, a relatively short-lived recession will be followed by a resumed march of the economy to new heights of expansion and prosperity.
However, there is an increasing minority that fears that when the current bull-market bubble bursts, it might approach or surpass depths reached after the 1929 crash.
Floyd Norris, who is a featured New York Times financial columnist, comments on Clinton’s speech on the editorial page of the Jan. 25 edition under the headline: “Washington Brags as Trade Deficit Sets a Record.”
Norris addresses Clinton’s Wall Street bailout plan, making no pretense that saving Social Security is what’s intended and implying a worst-case economic scenario. These excerpts tell it like it is:
The president would have the government buy around four percent of more-or-less every business that sells stock. … In addition, he would give each of us … some money to choose our own stocks. The Republicans would let us use Social Security money to buy our own stocks. Both are certain that buying stocks is a sure-fire way to make money….
The stock market has been going up almost continuously since 1982, with the 1987 crash remembered as little more than a buying opportunity. … If pride precedes a fall, watch out. The country’s balance-of-payments deficit is nearing a record. Imports are up and exports are down as Americans spend all that they can earn, and then some.
The trade deficit-the most important part of the balance-of-payments picture-set an annual record in the first 11 months of 1998, and will grow larger this year. The risk is that some day there will be a balance-of-payments crisis that leads to a tumbling dollar (that is, in fact, one way to explain what is happening in Brazil).
There is no American crisis now because foreigners are happy to invest their dollars in our economy. The dollar remains the only reserve currency for many foreign central banks, which are happy to hold large dollar balances. Instead, the problem [of the balance-of-payments crisis] is all but ignored, and the only nod to it comes in the form of protectionist demands that Japan stop exporting so much steel to this country.
As the Fed chairman, Alan Greenspan, said last week, protectionism is no solution and would likely make our problems worse.
If an American balance-of-payments crisis does develop, it is likely to come as a surprise and to be accompanied by a falling stock market, as confidence in America declines and both foreign and domestic investors try to bail out before it is too late.
Trade deficits are not nearly as interesting as lies about sex. But they may be more important.
Capitalism’s experts, when talking to each other, as Norris here does, cut through the baloney and portray Clinton’s plan for what it really is-an emergency rescue plan for American capitalism.
They apparently hope that the mere fact that by having in the works the transfer of trillions of dollars to Wall Street to boost stock prices when they begin to collapse, will be enough to soften a crash when it comes.
In any case, the American capitalist class intends to move toward implementing their plan with extreme caution since a flood of new capital into the market before the bubble bursts would send it zooming higher into the stratosphere.
And, as anyone should know, the higher stock prices climb, the further and harder, and the more damaging, the fall.
1 The Jan. 16 Peoples World reports that “a policy statement adopted by the AFL-CIO Executive Council last August … [called for changing] the ‘investment mix’ of the Social Security Trust funds-now nearly $800 billion-by investing a portion of the surplus in the stock market.”