Socialist Action /February 1999
Clinton's 'Cure-All' Speech is Bad Medicine For Retirees
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 deficits
have 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."
Socialist Action /February 1999 |