Scare-mongering on Social Security Continues

I thought Halloween and it’s horrible scary-stories was 5 months ago.  Apparently I’m wrong. The NY Times is running a front-page (on the web at least) scary headline about Social Security that implies the system is starting to fail and will go bust.  Nonsense.  I’ll let Randy Wray from UMKC and New Economic Perspectives explain:

Ok, here is the dumbest headline the NYTimes has run in recent days:

Social Security Payouts to Exceed Revenue This Year
The system is expected to pay out more in benefits this
year than it receives in payroll taxes, a tipping point
toward insolvency.

Social Security is a federal government program. Government pays Social Security benefits by crediting bank accounts. It can continue to do this even if payroll taxes fall to zero. The payment is an entry on the balance sheet of the Social Security recipient’s bank. Please write your representative and tell her or him to stop this nonsense right now.

Just as Wall Street went after healthcare, you can be sure that it is now going after Social Security. They hype is just starting. It comes in waves—whenever Wall Street loses a bundle, it looks to government bail-outs. What happened after the bust? Wall Street got President Bush to talk about an ownership society, proposing to dismantle Social Security to give households “ownership” over their own personal retirement accounts. The nonsense was obvious at the time: Wall Street had a big hole to fill, so it wanted households to “invest” payroll tax receipts in Wall Street managed accounts. That way, the same bozos who had just wiped out private savings by inducing gullible households to invest in would be able to wipe out retirements investing in other Wall Street schemes. Wall Street lost that round.

But now it is back. Wall Street’s latest excesses managed to destroy the economy. Those who lost their jobs or who had to take paycuts are paying less in FICA taxes. Hence, Social Security’s “revenues” are lower. That is a big boon to Wall Street—which will now whip up hysteria about Social Security’s looming bankruptcy. This is to direct attention away from the true insolvencies—which is all of the major private banks. It is also designed to scare the population about Social Security: will I ever get my Social Security pension?

Make no mistake about this. Unless voters tell their representatives to keep their dirty hands off Social Security, the Democrats and Republicans will work out a “compromise” to turn it over to Wall Street—just as they did with health insurance “reform” in the HIBOB (health insurer’s bail out bill). This is priority number one for Wall Street now, since it has lost trillions of dollars and is massively insolvent. It needs more government bail-out and it wants your Social Security.

Exile on Main Street

Back in the beginnings of the 2008 Global Financial Meltdown, there was  a lot of talk about how and whether the troubles on Wall Street would affect “Main Street”. After all, not all downturns on Wall St. result in recessions. Of course, in the actual event, Wall Street’s troubles were severe but quickly remedied by federal government and Federal Reserve bail-out and rescue efforts.  Unfortunately, the rescue efforts were could not prevent the spill-over onto Main Street.  The real economy of everyday goods and services production and consumption (“Main Street”) has suffered mightily.  Extraordinarily high and persistent levels of unemployment, declines in real wages and hours worked, evaporating credit for small businesses, etc. have inflicted real pain.  Most distressing is the the disconnect between the ideology pursued by policymakers in Washington and the reality of distress.  The policymakers continue to pursue a belief that subsidies and tax cuts for Wall Street and Global Multi-nationals will encourage them to lead the recovery on Main Street.  The evidence says otherwise.

Robert Reich agrees and summarizes as:

Recovery depends on Main Street, by Robert Reich, Commentary, Financial Times: Can the American economy recover if only its big global companies, Wall Street and high-income Americans are doing better, but its small businesses and middle and lower-income Americans are not? The short answer is no. …

US companies have lots of cash… But this cash is not going into new investment. … None of this is stopping supply-side fanatics from arguing government needs to cut taxes on big corporations to spur the recovery. Their argument is absurd. Big companies do not know what to do with all the cash they have as it is. They are not investing it in new plant or jobs. So why should the government cut their taxes and enlarge their cash hoards even more?

The picture on Main Street is the opposite. Small businesses are not selling much as they have to rely on American consumers and Americans still are not buying much.

Small businesses are also finding it hard to get credit. … While big companies are finding it easy to borrow in the bond markets, smaller companies depend on bank credit, whose supply remains limited. … This is a problem because companies with fewer than 100 employees accounted for almost half of net job growth during the last two recoveries…

Unemployment or fear of it continues to haunt the population. That is a major reason why consumer confidence is still dropping. There is also the extra need to save as boomers face retirement. Given all this, it is sensible for Americans to continue holding back from the malls, but this means a painfully slow recovery. …