Wall Street Oligarchs Eying Social Security

By Paul Craig Roberts

02/18/2010

Hank Paulson, the Gold Sachs bankster/U.S. Treasury Secretary, who deregulated the financial system, caused a world crisis that wrecked the prospects of foreign banks and governments, caused millions of Americans to lose retirement savings, homes, and jobs, and left taxpayers burdened with multi-trillions of dollars of new U.S. debt, is still not in jail. He is writing in The New York Times urging that the mess he caused be fixed by taking away from working Americans the Social Security and Medicare for which they have paid in earmarked taxes all their working lives.

Wall Street’s approach to the poor has always been to drive them deeper into the ground.

As there is no money to be made from the poor, Wall Street fleeces them by yanking away their entitlements. It has always been thus. During the Reagan administration, Wall Street decided to boost the values of its bond and stock portfolios by using Social Security revenues to lower budget deficits. Wall Street figured that lower deficits would mean lower interest rates and higher bond and stock prices.

Two Wall Street henchmen, Alan Greenspan and David Stockman, set up the Social Security raid in this way: The Carter administration had put Social Security in the black for the foreseeable future by establishing a schedule for future Social Security payroll tax increases. Greenspan and Stockman conspired to phase in the payroll tax increases earlier than were needed in order to gain surplus Social Security revenues that could be used to finance other government spending, thus reducing the budget deficit.

They sold it to President Reagan as "putting Social Security on a sound basis."

Along the way Americans were told that the surplus revenues were going into a special Social Security trust fund at the U.S. Treasury. But what is in the fund is Treasury IOUs for the spent revenues. When the "trust funds" are needed to pay Social Security benefits, the Treasury will have to sell more debt in order to redeem the IOUs.

Social Security was mugged again during the Clinton administration when the Boskin Commission jimmied the Consumer Price Index in order to reduce the inflation adjustments that Social Security recipients receive, thus diverting money from Social Security retirees to other uses.

We constantly hear from Wall Street gangsters and from Republicans and an occasional Democrat that Social Security and Medicare are a form of welfare that we can’t afford, an "unfunded liability." This is a lie. Social Security is funded with an earmarked tax. People pay for Social Security and Medicare all their working lives. It is a pay-as-you-go system in which the taxes paid by those working fund those who are retired.

Currently these systems are not in deficit. The problem is that government is using earmarked revenues for other purposes. Indeed, since the 1980s Social Security revenues have been used to fund general government. Today Social Security revenues are being used to fund trillion dollar bailouts for Wall Street and to fund the Bush/Obama wars of aggression against Muslims.

Having diverted Social Security revenues to war and Wall Street, Paulson says there is no alternative but to take the promised benefits away from those who have paid for them.

Republicans have extraordinary animosity toward the poor. In an effort to talk retirees out of their support systems, Republicans frequently describe Social Security as a Ponzi scheme and "unsustainable." They ought to know. The phony trust fund, that they set up to hide the fact that Wall Street and the Pentagon are running off with Social Security revenues, is a Ponzi scheme. Social Security itself has been with us since the 1930s and has yet to wreck our lives and budget. But it only took Hank Paulson’s derivative Ponzi scheme and its bailout a few years to inflict irreparable damage on our lives and budget.

Years ago with stagflation defeated and a rising stock market, I favored privatizing Social Security as a way of creating a funded retirement system and producing greater savings and larger incomes for retirees. At that time Wall Street was interested, not for my reasons, but in order to collect the fees from managing the funds.

Had Social Security been privatized, I doubt that Wall Street would have been permitted to deregulate the financial system. Too much would have been at stake.

After the latest crisis brought on by Wall Street’s dishonesty and greed, trusting Wall Street to manage anyone’s old age pension requires a leap of faith that no intelligent person can make.

Wall Street has got away with its raid on the public treasury. Now, pockets full, it wants to pay for the heist by curtailing Social Security and Medicare. Having deprived the working population of homes, jobs, and health care, Wall Street is now after the elderly’s old age security.

Social Security, formerly an untouchable "third rail of politics," is now "unsustainable," while the real unsustainables — a pre-1929 unregulated financial system and open-ended multi-trillion dollar Global War Against Terror — are the new untouchables.

This transformation signals the complete capture of American democracy by an oligarchy of special interests.

Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here for Peter Brimelow’s Forbes Magazine interview with Roberts about the epidemic of prosecutorial misconduct. His latest book, How The Economy Was Lost,

has just been published by CounterPunch/AK Press.