Weakening welfare

George W. Bush's proclaimed attempt to strengthen America's Social Security system is only a ploy to erode one of the few welfare provisions left in the country.

SOCIAL Security is the third rail of modern American politics. Since the passage of the Social Security Act of 1935, no American politician has been able to lead a successful charge against it. When the Republican Barry Goldwater ran against Social Security in his doomed presidential campaign of 1964, his friend Ronald Reagan pointed out: "Barry proved you can't run against Social Security." This did not stop Reagan from trying two decades later. In 1982, President Reagan proposed to cut minimum benefits to three million Americans and transfer $82 billion for the expansion of the war machine. The public would not have it. Undaunted, Reagan refashioned himself as the defender of Social Security: "I will not stand by and see those of you who are dependent on Social Security deprived of your benefits."

What the United States public will not allow is just what the Bharatiya Janata Party and now the United Progressive Alliance government want for the Indian citizenry: privatised pension schemes that tremble before stock market fluctuations. The Pension Fund Regulatory and Development Authority Bill that will enter the monsoon session of Parliament seeks to cut down the guaranteed emolument for Central government employees. As far as pensions are concerned, the U.S. is far more socialist than India. Twenty years after the Reagan attempt, in 2005, President George W. Bush brought the issue of Social Security back on the national radar. Rather than speak of the abolishment of Social Security (like Goldwater) or of the cutback in spending for Social Security (like Reagan), Bush talks about the "strengthening of Social Security". Social Security, as Bush puts it, has been a greater "moral" victory for America because it meant that most Americans would not "retire into poverty".

Until the 1935 Act came into effect, a minuscule number of Americans had access to pension plans from their employers or from the government. To grow old meant to fall back upon the love and loyalty of family members or else to continue to work for minuscule wages. The Social Security Act created a social insurance scheme to make sure that most Americans did not suffer the indignity of poverty after a lifetime of work. Bush, even on his best days, could not engineer a successful frontal assault on the diverse constituency that benefits from this government provision. After he signed the 1935 Act, President Franklin D. Roosevelt noted: "No damn politician can ever scrap my Social Security programme."

The antipathy to Bush's attempt to "strengthen" Social Security is such that even the notoriously arrogant White House has had to consider the possibility of defeat. When Roosevelt signed the Social Security Act on August 14, 1935, he warned that it would not be a panacea for life's ills. "We can never insure one hundred per cent of the population against one hundred per cent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age." The omnibus Social Security Act that went into law drew its principal logic from the social democratic idea of the social wage. The "social wage" is that amount of the deferred wages that goes toward the creation of various publicly available goods such as public transportation, public health services, public schools, public parks, public postal delivery, public safety and what not. Public services are legally available to all (even if the services in an affluent part of the country are better than those in an impoverished part). Social insurance schemes, such as Social Security and unemployment insurance, are part of the social wage. Everyone who works pays into the scheme through a flat payroll tax (6.2 per cent from workers, raised to 12.4 per cent with an employer contribution). The money is then paid out to those who need it, and the rest is held in a trust. In 2004, the Social Security Fund produced an income of $658 billion, paid out $493 billion and reinvested $165 billion. That year benefits went out to 48 million Americans, of whom the bulk were retired workers (33 million) and the rest were either survivors of deceased workers (7 million) or disabled workers (8 million).

The constituency that benefits from Social Security is vast. The Social Security system in place in the U.S., however, was not the best plan put before the U.S. Congress in the 1930s. For one, to benefit from Social Security, the worker had to earn 40 Social Security credits or about 10 years of paid work. Those who worked without pay (such as home-makers) or those who worked in part-time or seasonal jobs, could not benefit from the system. The argument made to justify this is that only those who pay into the system should benefit from it. However, employers raise their prices to compensate for their contribution to Social Security, and everyone contributes to the Social Security fund through the payment of sales tax. Nevertheless, only those who worked for wages could have access to the system.

Even among these workers, the system discriminated against those who worked for lower wages. The flat payroll tax (6.2 per cent) is regressive, and it only taxes income up to a ceiling of $90,000. Not only are workers with lower wages paying a greater chunk of their incomes into the fund, but the system shelters the exorbitant incomes of the super-rich. Little wonder that the Social Security Fund has faced several fiscal crises. In February 2005, a Washington Post poll found that 81 per cent of respondents wanted Americans to pay Social Security taxes on their incomes over $90,000. If the government removed just that one cap, it would be able to fund the Social Security system for another 75 years.

When Roosevelt came to power in the midst of the Great Depression, he quickly created public works projects to provide relief for desperately poor and unemployed Americans. In 1934, Roosevelt called for an end to direct relief on the grounds that "continued dependence on relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre". Direct relief had to go because "we must preserve not only the bodies of the unemployed from destitution but also their self-respect, their self-reliance and courage and determination". The political elite in the U.S. saw the Social Security Act as a compromise between the indolence of direct relief and the revolutionary conditions bred by starvation.

A mild social insurance scheme paid for by regressive taxes and available only to those who worked for at least 10 years passed the Congress. It also provided useful public relations, because the U.S. government could claim concern for its population even though a section had been cast to the wind. Social Security provisions spoke of helping those who help themselves, of taking care of the hard working when they entered old age or infirmity. Those who did not work for a wage, but who raised children, however, did not qualify for Social Security. They earned a benefit known as Aid for Families with Dependent Children (AFDC), or what in the U.S. was called "welfare".

Whereas Social Security came with few strings, the government used the tiny AFDC payments to supervise and regulate the lives of women. A 1936 provision noted: "This Act affords a unique opportunity to raise the standards of homecare." If single women with children had a strained relationship to Social Security, African Americans had an even more tenuous one. As a sop to southern white racist politicians, Roosevelt had denied Social Service benefits to farm labourers, tenant farmers, migrant workers and domestic workers - all occupations then dominated by African Americans. They could not get farm subsidies, unemployment insurance, minimum wages or Social Security, the cornerstones of Roosevelt's New Deal. In this context Langston Hughes wrote his powerful poem, "Let America Be America Again":

O, Let America be America again/ The land that never has been yet/ And yet must be the land where every man is free/ Who made America,/ Whose sweat and blood, whose faith and pain/ Whose hand at the foundry, whose plow in the rain,/ Must bring back our mighty dream again.

Hughes' hopefulness that America must become what it never was emerged in the powerful social movements against racism and sexism. Access to the social wage and to the social insurance scheme became the rallying cry of the civil rights, women's and workers' movements of the bulk of the 20th century. When they won the right to them in the 1960s, they formed part of a rock-hard coalition to defend these entitlements. Thus far the Bush administration has not been able to shake them. President Bush argues that the Social Security system is bankrupt, and that young workers should be allowed to opt out of it. Instead of payroll taxes, the government should allow workers to invest their income into retirement plans.

This already occurs because the Social Security payment is modest (the average monthly retirement benefit in 2005 is $955, which is just a bit more than the federal poverty line). Most workers who can afford it already buy into some kind of private insurance scheme (a few are able to rely upon employer pension plans, although these are now mainly a thing of the past). What Bush proposes is not what is already being practised. He wants to allow workers to refuse to pay their payroll tax, which is a way to erode one of the few social provisions left in the U.S.

To privatise Social Security is to end the one governmental institution that offers its citizenry the feeling that they contribute toward the well-being of one another. To move the Social Security money from a governmentally regulated Fund to the vagaries of the stock market is to turn a guarantee into a gamble. The unending stock market scandals only make privatisation of one's retirement more unpalatable. Further, the private retirement schemes that workers already hold (the 401K accounts) lost their value by a quarter between 1999 and 2003, a harbinger of what might come.

Public discontent with the Bush plan is no guarantee that it will not pass. In 2001, the Bush administration repealed the inheritance tax. The most progressive part of the U.S. tax code, the estate tax, made the richest 2 per cent either donate roughly half of their wealth to charity or else to turn it over to the government. The Bush team spun the story so effectively that the "death tax" became another instance of governmental interference in the liberty of its citizens. A Time/CNN poll in 2000 showed that 39 per cent of Americans believed that they were either in the wealthiest 1 per cent or else were to get there soon. In that case, they wanted to do away with a provision that might hurt them. If the estate tax could be repealed, so can Social Security be vanquished. Nothing is sacred when the population is terrified.