The House Monkey Wrench Gang

Dean Baker

July 01, 2005

Dean Baker is economist and co-director of the Center for Economic and Policy Research.

After President Bush was re-elected , he told the country that he wanted to overhaul Social Security. He said he wanted to make the program fully solvent for the indefinite future. He also complained that the rates of return on Social Security were too low, so he wanted to be able to give workers a higher rate of return by investing their money in the stock market. While some of President Bush claims were inaccurate or misleading, at least he offered a positive vision of a privatized alternative to Social Security. The same cannot be said for the monkey wrench crew in the House Ways and Means Committee who are lined up behind the McCrery Bill.

This group of Republican members of Congress is putting forward a plan that would lead to a shortfall in 2033, unless the program gets an infusion of more than $400 billion from the rest of the budget, according to projections from the Social Security actuaries. This isn’t quite “fixing” Social Security once and for all, as President Bush proposed.

The plan includes private accounts, as President Bush insisted, but they will not go very far toward paying the bills. According to projections from the Social Security actuaries, an average wage-earner who is currently 44 years old can expect to see a benefit of less than $55 a month from these accounts when she retirees at age 65 in 2026. The actuaries estimate that someone who is currently age 14 and has not yet started working will get a bonanza of $11 a month from these accounts when she retirees in 2056.

Even these numbers are generous. The actuaries assume a much higher rate of return on stocks than most private economists consider plausible. They also assume that these private accounts will be administered at a far lower cost than has been the case with existing accounts in the private sector.

Of course, the Republican sponsors of the McCrery Bill can read the actuaries’ analysis as easily as anyone else. They know that this is not a serious proposal for reforming Social Security. That’s not the purpose of the McCrery Bill. The purpose of the bill is to throw a monkey wrench into a system that is currently projected to be financially sound far into future. (The most recent projections from the Congressional Budget Office show Social Security not facing a shortfall until 2052.)

The truth is, the American people like the existing Social Security system and they don’t like privatization. They value the security of Social Security’s guaranteed benefit and they do not want to give it up for the risk of investing in the stock market. They also see no reason to cut benefits, which is a key part of President Bush’s agenda.

President Bush and other proponents of privatization have spent the last eight months trying to rally support for privatization. They have even gone so far as to try to frighten people into thinking that the government will default on the bonds held by the Social Security trust fund. (Remember when President Bush visited the Social Security trust fund and remarked that the bonds were “just sheets of paper?”) But their scare tactics have not worked—privatization is less popular today than when President Bush first took up the cause.

The McCrery Bill is an effort to get around this problem by taking hundreds of billions of dollars out of the trust fund and using the money to create private accounts. By making Social Security less sound and getting a system of private accounts off the ground, the Republicans hope to make a more compelling case for full-fledged privatization a few years down the road.    

Of course, the privatizers' current tack assumes that the public will just sit passively as they start to dismantle Social Security. That is an unlikely scenario for a program that provides an essential lifeline for tens of millions of workers and their families. While the public is no more likely to buy this monkey-wrenching effort than they were plans for outright privatization, it is striking that President Bush’s grand vision has now morphed into a simple plan for sabotage.