John RapleyEARLIER THIS year, US President George W. Bush announced plans for a centrepiece of his second administration, the proposed privatisation of Social Security. Social Security, the US's national pension plan, is one of the most popular programmes ever crafted by the US government. The Bush administration says it faces imminent crisis. So, the White House is proposing a historic overhaul of the programme, which would involve privatising it.
As things stand, American workers and their employers pay into the Social Security fund, which then uses the receipts to pay benefits to pensioners. Any surplus left over after these benefits-payments are then invested in US government securities, which are kept in a trust fund. As the population of retirees grows, this fund can be drawn down to supplement revenues from member contributions.
FUTURE CRISIS
Therein, say some observers, looms the future crisis. America's population is no longer growing at the rates it was when Social Security was first created seven decades ago. The share of the population that is elderly is steadily increasing. This is placing ever heavier demands on pension and health-care budgets. If America's Social Security system faces an eventual crisis, its health-care system could potentially bankrupt the nation.
Health-care expenditure is rising at double-digit annual rates, in no small measure because people are living longer and so are placing more demands on the system. Tough choices will become more or less unavoidable. But it is not entirely clear that Social Security will face such a crisis.
As a rule, the pension systems of the
industrial world will face a cash crunch in this century as the dependency ratios the share of the population that is not working of the industrial world go up. But Social Security has a larger trust fund than other countries' pension systems, and immigration will keep the American population growing.
PROFOUND REFORM
Moreover, even many analysts who do argue that Social Security nonetheless needs profound reform suggest that a change in the management of the trust fund will suffice. Adjustments to contributions or benefits - upwards in the former case, downwards in the latter might be all that are required.
Thus, there seems to be more to Mr. Bush's proposal than his stated wish to preserve the solvency of Social Security. Indeed, it may be that he is using Social Security's future fiscal challenges as a Trojan horse. He seems to be trying to slip something else onto the agenda.
BELOVED FEDERAL PROGRAMMES
His hidden goal might be to dismantle one of the most enduring and beloved federal programmes. Ever since Franklin D. Roosevelt inaugurated the New Deal back in the 1930s, thereby greatly augmenting the power of the federal government, Republicans have been trying to shift power back to the states, where they feel it rightly belongs. They share a strong antipathy to the federal government, which they see as a hotbed of liberalism.
Over the decades, Republican presidents have appointed Supreme Court justices who have tended to side with the states in their jurisdiction struggles with the federal government. Republicans have also tended to slash federal spending on programmes they see as Democratic fronts - like welfare while boosting it on those programmes seen to
be Republican priorities like defence and national security. Democrats have often fought these initiatives. On occasion, they have gone along with them, as Bill Clinton did with welfare reform, and Congressional Democrats did more recently with Mr. Bush's tax-cut package.
ASSAULT ON 'DEMOCRATIC' POLICY
Yet reform of Social Security would represent the largest-ever assault on a 'Democratic' policy. Democrats created it, and Democrats have defended it. But perhaps more important than anything else, many analysts suggest that what Social Security has done is to maintain the attachment of all Americans to their federal government. When Republicans talk of getting government off the backs of the people, Democrats can rally around much-loved programmes like Social Security.
Some Republicans thus see the privatisation of Social Security, whereby Americans would pay into their own stock-market accounts, as a way to sever this bond. In the process, Americans would become less like Democrats, and more like Republicans. If Democrats have historically been the party of workers, and Republicans the party of owners, what better way to create Republicans than to make all Americans into little owners?
John Rapley is a Senior Lecturer in the Department of Government, UWI, Mona.
