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Privatizers Plan To
Eliminate Social Security

Feb. 10, 2005 (EIRNS)—EIR investigators filed this report on the Feb. 8-9 Cato Institute Conference on Social Security in Washington, D.C.

The Mont Pelerin Society's Cato Institute, which is Wall Street's command center for Social Security privatization, held a two-day event Feb. 8-9, attended by 200 people, which featured Bush Administration spokesmen, bankers, and leading privatizers, to map out the latest plans for privatization.

Serving as an old home week get-together, some people made statements within the friendly confines of Cato's Friedrich Von Hayek auditorium that they would not make elsewhere. (Interestingly, José Piñera, the Cato Fellow who has been the prime spokesman for Social Security privatization, from Chile to the United States, was not present.)

Thomas Saving, one of the seven members of the board of Trustees of the U.S. Social Security Administration (SSA), led off the panel on the "Social Security crisis." Michael Tanner, the executive director of Cato's Social Security Privatization Project (which Project is co-chaired by Piñera), introduced Saving as "the real hero of the [Robespierrean] revolution, who has spoken at Cato several times." Saving, who as a Trustee is sworn to protect the SSA, savaged it instead, indicating the extent to which SSA has been dangerously eroded. Savage said that the Social Security Trust Fund (SSTF), "provides no benefits, it is an authorization to pay benefits. Well, I authorize all of you in the audience to go to Paris—if you can find the money. If you can't find the money, then it's not much use." Saving said, "[the American] people believe they have a moral and legal rights to Social Security. They don't." He lied that the Trust Fund is without funds, and suggested that Social Security's bankruptcy would occur in 2018.

EIR asked Saving, after he had spoken: "The Social Security Trust Fund holds $1.5 trillion of U.S. Treasury bonds. Are you saying the government should default on the bonds?" Saving said, "We will honor the bonds." EIR: "Then the Trust Fund can use the interest from the bonds." Saving said, "The interest on the bond is a fiction, it's not real." EIR pursued the point. "The Treasury pays interest on Treasury bonds held by the Chinese and Japanese. That is real. Why isn't the interest owed to American bond-holders real?" Saving snapped, "We have to pay interest to the Chinese and Japanese. We can decide to break the rules. 535 people [i.e., the Congress] can rule that the bonds don't have to pay interest" to the Trust Fund.

Saving is a Social Security Trustee. Should he not be removed?

Al Hubbard, the new director of President Bush's National Economic Council, stated, "I'm so proud to serve President Bush; his state of the Union address was one of the greatest ever." In staccato-fashion, Hubbard ran through a Power Point presentation similar to the one that Bush uses in stump speeches. The presentation was built upon incredible lies—at one point Hubbard said that the SSTF "is like a bank account with no money in the bank"—but one of his power point slides showed very clearly an approximately 40% cut in a retired worker's Social Security benefits. Hubbard claimed that the loss would be made up by the "earnings" from "personal investment accounts." One questioner pointed out that a Treasury Department spokesman had said during the background briefing prior to Bush's State of the Union address, that the Wall Street private accounts do nothing to correct the solvency of the Social Security system. Hubbard changed the subject, rather than answer.

From the floor, EIR asked, "You said that Social Security Trust Fund is like a bank account with no money in it. Actually, the Trust Fund has $1.5 trillion in U.S. Treasury bonds, backed by the faith and credit of the United States, like Treasury bonds around the world. By saying the Trust Fund is empty, is the Bush Administration declaring that it will default on the Treasury bonds, because that will bring down the world financial system?" Hubbard showed an irrelevant chart, and refused to answer the question.

After he had finished speaking, EIR posed the question to Hubbard again. With cameras flashing, Hubbard defensively answered, "We will honor our commitments. We won't default." EIR: "Then will you use the Treasury bonds to pay benefits, as under law?" Hubbard's answer revealed that the Bush Administration has no real intention of honoring the bonds: "We don't want to have to come to that point. We will make changes first." As EIR started to asked the next question, an aide pushed Hubbard away from the group of people who had gathered, and shouted, "If you want your question answered, call us in the office."

Psychotic `Experts'

Martin Feldstein, former head of the Council of Economic Advisers under President Ronald Reagan (1982-84) delivered one of the keynote addresses, and re-iterated his claim that the stock market will offer a 6.9% rate of return every year—it is Feldstein's rantings which are cited by most of the privatizers. Feldstein demanded "investment-based personal accounts" set up not only for Social Security, and Medicare, but for unemployment insurance! Feldstein demanded a formula for Social Security benefit cuts (0.3% benefit cut each year of the first five years; rising over each five year interval by another 0.3%, until it reached 1.5% per year), so that, benefits would be cut cumulatively by 40%.

In a brutally frank and cynical presentation, Jagadeesh Gokhale, a Cato Senior Fellow who leads work on Social Security, affirmed that the bankers don't care about youth. He stated, "most young people don't expect to get Social Security benefits. So we tell them, 'You won't get the level of [promised] benefits and you don't expect them anyway, but you'll get investment accounts instead.' That's a good deal."

The Cato panel on "Women, Minorities and the Poor" was a hypocritical joke. Leanne Abdnor, one of the Cato Institute officials who was a member of, and wrote the December 2001 final report of George W. Bush's official "President's Commission to Strengthen [sic] Social Security," launched a prolonged attack on a progressive feature built into Social Security, the "spouse provision": If a married woman did not work but raised a family, she would still get her own permanent Social Security benefits (equal to half the value of her husband's benefits).

Meanwhile, Star Parker, Cato's 'representative' African American, who chaired the panel, delivered an attack on Social Security, saying we have to "get off government coffers." Afterwards she explained the real purpose of privatization to EIR, "I was on welfare, but I got off and learned. I worked with Newt Gingrich to pass the 1996 Welfare Reform Law. Social Security is a redistribution program, it's welfare. We should end Social Security. But if we can't end it now, we can move it in the direction of welfare reform, first make changes, and eventually end it."

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