The Battle of 2016

Progressives and Bush’s Wall Street Go to War Over Your Social Security Benefits


Privatizers insist that only drastic change can prevent "generational warfare" over Social Security. Once the Baby Boomers start to retire, they argue, retiree benefits payments will place an intolerable burden on current workers. Workers need PRAs so that they can make up for the inevitable benefits cuts with higher returns from the stock market.

Social Security's traditional champions—progressive Democrats, unions, activists for seniors—say the system's demographic crisis, if it ever comes, can be corrected with some simple adjustments. For instance, Congress could increase payroll taxes slightly, or raise the payroll tax threshold so wealthy earners would have to contribute more to support the system. Creating PRAs would only aggravate the problem by siphoning off payroll taxes that Social Security will need to pay current retirees. In fact, a report by the liberal Center for Budget and Policy Priorities estimates that if a substantial portion of workers decided to put 2 of the annual 7.65 percent they pay in payroll taxes into PRAs instead, the trust fund will start paying out more than it receives in 2007, not 2016. Add to that the current state of the stock market, and privatization wouldn't seem to have much of a chance.

The coalition of conservative ideologues and financial services vendors who have spent 20 years building the privatization movement—the Heritage Foundation, the Cato Institute, and Americans for Tax Reform, along with big donors like State Street Bank, Merrill Lynch, and pension consultant Frank Russell Company—see the under-40 crowd as their ace in the hole. Having entered the workforce at a time of steadily giddier stock market returns and increasingly mainstream anti-government rhetoric, the younger reaches of the Baby Boom plus Gen X aren't as likely to be spooked by a temporary reversal of fortune. That could make them the voters who finally reject the New Deal's flagship social program.

Wall Street-backed policy groups like Third Millennium, which purports to represent the interests of twentysomethings, have been clambering for their demographic's attention for nearly a decade. Third Millennium made its first big splash in 1994 with a poll showing that more young Americans believed in UFOs than believed they would live to receive a Social Security check, which became one of the most repeated survey citations of the 1990s.

In fact, younger Americans have plenty of reasons not to want Social Security turned into a no-guarantees investment fund. If current benefits stay the same for current retirees and workers nearing retirement while payroll taxes are flowing into PRAs, privatization could require trillions of dollars in new taxes a generation from now. Disappearing stock options aside, even dotcommies are more likely than their elders to work in temporary jobs or ones that provide no guaranteed pension. That means they will have a harder time saving on their own for retirement, and may be even more dependent on Social Security's guaranteed income when they hit retirement age. Many of them are already "in" the program, in fact. Of the 44 million Americans who get a Social Security check each month, 13.5 million are spouses and children receiving disability or survivors' benefits.

What's needed, some say, is a sustained effort to reeducate younger Americans about Social Security's promise. The Campaign for America's Future, the progressive lobbying group which has put together a save-Social Security coalition with other groups including the National Organization for Women, USAction, the Gray Panthers, the Rainbow Coalition, and an assortment of unions including the SEIU, the American Postal Workers, the National Education Association, and the United Auto Workers. But these groups represent mostly older constituencies. And funding a grassroots campaign is an expensive proposition.

State Street Bank generously funds Cato's Social Security Privatization Project, which provides much of the theoretical backbone for the privatization proposals Bush's commission is considering. Outside of the AFL-CIO and a few unions, groups that oppose privatization, like the Campaign for America's Future, USAction, the 2030 Center, and the Pension Rights Center, don't have those kinds of godparents.

But lately the political winds seem to be shifting in their side's favor. Even experts who endorse Bush's private account scheme admit that he can't implement it and still keep Social Security fiscally solvent without either raising taxes, which he has ruled out, or cutting benefits, which would shred privatization's voter appeal. At a meeting of the AARP in February, Conservative firebrand Bill Thomas, new head of the House Ways and Means Committee, warned the powerful seniors' group that he would welcome an intergenerational clash. "Frankly, you shouldn't be the winners you are," he said. Thomas told them his committee would soon hold a series of hearings around the country where retirees and Gen Xers could express their views on the matter.

Two Republican House members, Florida's E. Clay Shaw Jr. and Missouri's Kenny Hulshof, held the first hearing on a university campus in Columbia, Missouri, in June. But the 2030 Center, a Washington-based public policy organization that has been rallying support for Social Security among young people, was there too. Working partly through a group of UNITE interns, it alerted students as well as union locals to send people to the event. At the hearing, which drew about 250 people, Shaw and Hulshof issued different colored armbands to younger (red) and older (yellow) attendees so as to alternate questions and comments from each "side." But according to 2030 director Jeff Mandell, no intergenerational rift emerged. "I think they were stunned by the size of the crowd and the lack of support for their ideas," Mandell says. Later, reports filtered down from Capitol Hill that a second hearing on another college campus had been called off. "Getting young people to actively play a leadership role—to me that's enough," says Hans Riemer, a 28-year-old senior policy analyst at the Campaign for America's Future.

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