In this issue:

Cato Pushes Social Security Privatization Plan

Dem Senate Leader Says No To Privatization

Rubin Issues Warning on Dollar Collapse

Food Imports Cut U.S. Ag Surplus to Near Zero

Lautenberg Calls for Expanded Health Care

Tennessee Poor To Lose State Health Benefits

Senators Back Army Corps Plan for Mississippi River

From Volume 3, Issue Number 46 of EIR Online, Published Nov. 16, 2004

U.S. Economic/Financial News

Cato Pushes Social Security Privatization Plan

Michael Tanner, the director of the Cato Institute's "Project on Social Security Choice"—the lead organization promoting Wall Street's scheme to privatize Social Security—threatened on Nov. 5, that Republicans "must decide whether they meant what they said when they promised to fix Social Security." This came the day after President Bush said he intended to "reform" Social Security.

In his Feb. 17 paper, "The 6.2% Solution: A Plan for Reforming Social Security," Tanner indicated that, under his plan, retirees will be left with few, if any benefits.

Under Tanner's plan, which is circulating in the Bush administration:

* Workers born after Jan. 1, 1950, would be "offered the opportunity" to establish Individual Social Security Accounts. After the plan has been in effect for a few years, ISS Accounts would become mandatory for all new entrants into the labor force, who would no longer be allowed to join the "old" Social Security system.

* Under the existing Social Security system, each worker contributes 6.2% of the value of his wages to the Social Security Trust fund, and his employer contributes a matching 6.2% of the value of the worker's wage to the Social Security Trust, for a total percentage of 12.4%. Under the Cato plan, the worker establishing an ISS Account would contribute 6.2% of the value of his wages to his ISS Account, for investment in stocks and bonds. The employer would contribute 6.2% of the value of the worker's wage to the Social Security Trust Fund, to pay down existing Social Security claims of retired workers. But the new worker would not receive any of this 6.2% that his employer contributes, thereby cutting in half the benefits that a worker would have returning to him.

* The worker establishing an ISS Account would be encouraged initially to invest 60% of his contributions into stocks, and 40% into bonds. But Tanner states that a young worker would be advised to put a much higher percentage of his contributions into stocks, siphoning trillions of dollars into the bubble-ized stock market.

Tanner also argues that "in reality, the Social Security Trust Fund is not an asset that can be used to pay benefits. Any Social Security surpluses accumulated have been spent [covering budget deficits], leaving a trust fund that consists only of government bonds (IOUs) that will eventually have to be repaid by taxpayers" (emphasis added). That is, according to Tanner, the looted Social Security Trust Fund has no money in it, except U.S. Treasury bonds, which the U.S. government would have to raise taxes to pay off, which Tanner is against. Then Tanner cites legal cases, which purport to show that "workers have no legally binding contractual or property right to their Social Security benefits, and those benefits can be changed, cut, or even taken away at any time." Tanner appears to be preparing the ground in his extended argument, to have the U.S. government severely cut or repudiate its Social Security benefit obligations to millions of elderly citizens.

Dem Senate Leader Says No To Privatization

Senator Harry Reid (D-Nev), who currently is minority whip in the U.S. Senate, and is expected to succeed Sen. Tom Daschle of South Dakota as Senate Minority Leader, in a Nov. 9 Washington Times interview responded to President Bush's call to privatize Social Security: "For someone who wants to privatize Social Security, they're going to have to look for somebody to go to bed with other than me. I'm not going to do that," he said. "Privatizing Social Security will destroy Social Security as we know it."

Rubin Issues Warning on Dollar Collapse

Former U.S. Treasury Secretary Robert Rubin warned that the dollar collapse could accelerate, and interest rates could rise, if the Bush Administration and Congress do not act quickly to rein in the record U.S. budget deficit. "If I were still at Treasury, I'd still be a strong advocate of a strong dollar policy," Rubin declared Nov. 9, presenting a veiled criticism of the Bush Administration quiet acceptance of the dollar's decline. Rubin, in a speech at the 29th anniversary dinner of Columbia University's Knight-Bagehot business journalism program, issued a wide-ranging warning about the devastating potential impact of continued Federal deficits.

"If markets begin to fear long-term fiscal disarray, and if foreign providers of the capital inflows upon which we have now become so enormously dependent share this fear and also develop a concern about our currency, then the markets may begin to demand sharply higher interest rates on long-term debt and possibly even create conditions of serious disruptions in our financial markets, with all the problems that that can lead to for our economy," he cautioned.

He added, "We have a lot of work to do in a very difficult political environment."

Rubin urged both Republicans and Democrats in Congress, to address the deficit sooner rather than later. "Dramatic change in fiscal policy is imperative. And I think that reality is likely to increasingly assert itself on the political system, however unwilling or reluctant on a bipartisan basis that system may be to actually deal with the actual hard choices that restoring fiscal discipline imposes."

Food Imports Cut U.S. Ag Surplus to Near Zero

The surge in food imports has now cut the U.S. agriculture trade surplus to near zero; it will be in deficit by 2005, the Wall Street Journal reported Nov. 8. The U.S. Department of Agriculture reported that in June and August, for the first time since 1986, there was a deficit in food trade. The last annual deficit was in 1959. The surplus reached a peak in 1996, but since that time U.S. imports have leaped by 62%, with far slower export growth. The front-page article in the Journal notes that the import spike since NAFTA and other free-trade deals were signed in the 1990s may be of benefit to consumers, but the widening trade deficit "is sustainable only as long as foreigners are willing to lend the U.S. large amounts of money," and "economists warn that this isn't likely to continue." Thus, they conclude, "risks are growing for a market-rattling crash in the value of the dollar."

Lautenberg Calls for Expanded Health Care

Speaking at a 10,000-person rally Nov. 7, Sen. Frank Lautenberg (D-NJ) charged that, in his 20 years in the U.S. Senate, the battle to "improve public health" has been "harder than it should be," due to "special interests that put private profits ahead of the public good." It is "shameful that 45 million Americans don't have health insurance, and it is doubly shameful that over 8 million of those Americans are children," he told the crowd. Access to health care for "young people" will be a fight. The greatest challenges ahead, he insisted, "will be to protect programs ... such as Medicare, Medicaid, and S-CHIP" and to make drugs affordable to the people who need them.

"I supported Senator Kerry's clarion call during the campaign to guarantee health insurance for every child. Is that expensive? Absolutely! But not as expensive in the long run as not providing that coverage!" Lautenberg, an octogenarian, concluded, "I'm not going to rest on my laurels. I'll continue to stand ... in the battles we wage" for a healthier America.

Tennessee Poor To Lose State Health Benefits

Tennessee's disabled and low-income citizens, since 1994, have had an enhanced Medicaid program called TennCare, a program designed to provide nearly universal coverage for all the state's citizens. Governor Phil Bredesen (D), a former health-care executive, has declared that the program costs too much, so he will terminate it. As of January 2005, people will begin to lose their health-care coverage. One columnist wrote in The Chattanoogan, "To torpedo TennCare is to sign their death warrants," referring to four specific people he knows, who, without TennCare coverage, will die. Weighed against the threat to the lives of 430,000 citizens who participate in the program, is the Governor's plan to save $5.1 billion dollars, i.e., cutting the $7.8-billion TennCare program and replacing it with a basic Medicaid program which will cost $2.7 billion.

Many of the 430,000 will not qualify to receive Medicaid; thus, more people will join the ranks of the uninsured in Tennessee. Already, even with TennCare in place, hospitals in the state provided more than $1 billion of uncompensated care. "If 430,000 people lose TennCare benefits," hospitals will lose much more, said the president of the Tennessee Hospital Association. Reimbursement rates to hospitals have already been lowered to cut costs.

All 50 states and the District of Columbia imposed health-care "cost control" measures in FY2004. In FY2005, a Kaiser Commission report found, all plan additional cuts, including in 22 states, where a co-payment requirement was added for non-preventative physician visits, emergency-room visits, and/or prescription drugs for children, for example. In FY2004, 38 states cut eligibility and 34 limited benefits, and those reductions occurred even though the U.S. Congress provided a one-time $10 billion "relief" to the states. That money ran out as of June 30. So the Federal match funds are now less, yet Medicaid programs are growing, as more people lose their employer-based health benefits, or lose their jobs.

Senators Back Army Corps Plan for Mississippi River

A bipartisan group of U.S. Senators are backing an Army Corps of Engineers plan to expand the lock-and-dam system on the Upper Mississippi River. Senators Tom Harkin (D-Iowa), Dick Durbin (D-Ill), and Charles Grassley (R-Iowa), in opposition to Cheney-Bush proposed budget cuts to the Army Corps, are seeking approval for the $1.4-billion project when Congress meets next week. The proposal would be included in a larger bill authorizing waterway projects. The three Senators have signed onto a bill implementing the Army Corps' recommendations to construct seven new locks along the Illinois River and the Mississippi River. "It's still alive," an aide to Sen. Grassley, the chairman of the Finance Committee, told the Quad-City Times Nov. 11.

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