SOCIAL SECURITY ISN'T BROKEN
WALL STREET BUSY BEHIND THE SCENES
Wall Street and the financial industry are quietly intervening to influence public opinion:
·DuPont Co., Morgan Stanley & Co., and others have donated nearly $1 million to Economic Security 2000, a group formed to develop grassroots support for privatization.
·Businesses and wealthy conservatives have provided a $2 million budget to Citizens for a Sound Economy for media ads and other activities.
·The insurance company American International Group Inc., the State Street Boston Corp., American Express Corp., and the discount brokerage company Quick & Reilly Group Inc. have given $2 million to the Cato Institute, a libertarian think tank that supports privatization, to fund research, conferences, and other activities for members of Congress, their staffs, and other groups.
·State Street Boston Corp., Fidelity Investments, and J.P. Morgan & Co. have recently sponsored forums on Social Security. -Source: Washington Post, January 7, 1997
THE SOCIAL SECURITY TRUST FUND IS NOT A MIRAGE
In anticipation of the retirement of the baby boomers, payroll taxes to fund Social Security were increased in the early 1980s.
The goal was to accumulate reserves that could be paid out to boomers when they retired in the early decades of the 21 st century. Currently, about $425 billion is collected each year in taxes but only $355 billion is paid out in benefits. The difference, about $70 billion, is deposited in the Social Security Trust Fund where the current balance is about $570 billion.
The money in the trust fund is invested in U.S. treasury bonds. The interest earned on the bonds, currently about $39 billion annually, is returned to the Trust Fund. These bonds help to finance the ongoing programs and operations of the federal government.
If the trust fund did not exist, the federal government would need to raise taxes or sell more bonds to private investors.
Beginning in about 2019 (if the Social Security Trustees' projections are correct), the trust fund will begin cashing out the bonds and using the proceeds to pay benefits.
Throughout history, the U.S. government has always paid its debts and, as a result, U.S. government bonds are considered one of the safest assets in the world. The Trust Fund owns very real and secure assets.
-From Paycheck Economics, February 1998, Vol. 1, No. 1, a publication of the Economic Policy Institute. For subscription information, contact EPI Publications at (800) 374-4844 OR (202) 331-5510 or write Economic Policy Institute, 1660 L STREET, NW, Suite 1200, Washington, D.C. 20036.
A summary of Paycheck Economics is available on EPI's web site: www.epinet .org.
OTHER RESOURCES
"Social Security Reform" is a 30-page pamphlet available from the 20th Century Fund at (212) 535-4441 or on the Internet at epn.org/tcf.html. Written in 1996 for a general audience, this fairly comprehensive report reviews the Social Security system, its current and projected financial condition, and the Advisory Council Report. "Social Security: The Wall Street Fix" and "Common Misconceptions about Social Security," two papers by Economic Policy Institute economist Dean Baker, are available from EPI at 800-374- 4844 or on the Internet at www.epinet.org.