Shock Therapy

Part 1

As all good torturers know, fear and uncertainty can be wonderfully motivating.

In Naomi Klein’s latest book, The Shock Doctrine, she explains how this simple principle has been used by international financial institutions to push through neo-liberal economic policy around the world. In the wake of crises and disasters, the boys from the IMF and the World Bank would show up, loans in hand, preaching the gospel of privatization and austerity.

The natives, their better judgment clouded by fear and confusion — or bribes, when needed — would generally submit. It was called “shock therapy.”

Klein has, however, been at some pains to deny any deliberate engineering of crisis by the neo-liberal shock cadres. And though I’m generally enamored with her thesis, here we part ways. To my mind, there’s plenty of circumstantial evidence that deliberate engineering is sometimes precisely what’s going on.

Case in point, right here at home: Social Security.

A recent headline from my local paper: “Social Security 13.6 Trillion Short.” Big, scary number, but you’ll search the article in vain for any contextual detail. Just how much is 13.6 trillion? And when will this shortfall occur? Next week? Next year? Sometime in infinity?

They don’t say. Just the scary number. The lack of context, boys and girls, is a clue you’re being played.

The correct answer is: “Sometime in infinity”.1

It’s the Bush Administration making its annual noises about the Social Security “crisis.” Alan Greenspan has been out hyping the same message. On Democracy Now, for example, he pronounced that “There is no alternative” to increased private funding of retirement.2

But wait a minute. Alan Greenspan? I dimly remember him as the guy who “saved” Social Security, back in the reign of St. Ronnie Reagan. Greenspan chaired Reagan’s National Commission on Social Security Reform, for heaven’s sake, and made the
recommendations that became the Social Security Amendments of 1983. A bipartisan Congress passed them, and Reagan signed them into law. St. Ron said at the time:

“This bill demonstrates for all time our nation’s ironclad commitment to Social Security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have one pledge that they will get their fair
share of benefits when they retire.”3

Now Alan’s saying we have to privatize? What terrible disaster’s occurred since 1983?

In fact, the disaster was the 1983 “reform” itself. Its main provision was an increase in Social Security taxes calculated to generate 25+ years of ever-increasing surpluses, surpluses that could be dumped into the general budget to grease the skids for tax cuts to the super-rich.

In 1983, 20 million in extra Social Security taxes and interest was collected, 20 million more than needed to pay retirees. In 1988, Reagan’s last year in office, the surplus was 38 billion. By 2006, it was 182 billion,4 and nearly 2 trillion in bonds sat in the Social Security Trust Fund, mostly surplus tax payments and interest accumulated since 1983.5

The 2006 surplus was 1/3 over and above the $544 billion mailed out to beneficiaries that year. 102 billion of it was interest paid to the Trust Fund, and 80 billion was excess payroll taxes: 13% of total collections.6

Tossed into the general budget, the 2006 surplus easily financed the Department of Education budget (67 billion),7 with plenty left to pay for the Administration for Children and Families (47 billion).

ACF, by the way, is welfare, Head Start, child support enforcement,* adoption assistance, foster care, child care, community block grants, energy assistance, and programs for the mentally retarded, refugees, and Native Americans.8

That’s how big the yearly Social Security surplus is.

Alternatively, the 2006 surplus would fund about a year of the war in Iraq. That’s how big the war budget is.”9

* Note: To add insult to injury, in 2007 the Bush Administration began charging for child support enforcement, automatically deducting the fee from the child support payments of the mostly poor clients.

  1. Social Security Administration, 2007 Trustees Report, Table IVB6. []
  2. Democracy Now 9/24/07. []
  3. R. Reagan, “Remarks on Signing the Social Security Amendments of 1983” 4/20/83. []
  4. Congressional Budget Office Historical Budget Data 1962-2006 []
  5. Social Security Administration, “Fiscal Year Trust Fund Operations.” []
  6. Social Security Administration, “Trust Fund Operations in 2006.” []
  7. Department of Education Budget History, 2007 Total Appropriation. []
  8. Administration for Children and Families, “ACF All-Purpose Table 2006 Enacted.” []
  9. “Iraq War Budget Jumps for 2008,” LA Times, 10/11/07, ret. 10/11/07. []
Hannah B. is from the Pacific Northwest and works in healthcare. She can be reached at: bbhannahb@yahoo.com. Read other articles by Hannah, or visit Hannah's website.

3 comments on this article so far ...

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  1. Dissident Voice : Shock Therapy: Three-Card Monte said on November 7th, 2007 at 5:01am #

    […] Part 1. Social Security Administration, “Agency History.” #Congressional Budget Office […]

  2. Dissident Voice : Shock Therapy: Perfect Storm said on November 14th, 2007 at 5:04am #

    […] Part 1, Part 2, Part 3, and Part 4. See discussion of the effect of “shock therapy” and […]

  3. Frank Palmer said on November 15th, 2007 at 10:26am #

    The Social Security system will ULTIMATELY go broke if:
    1) The payout schedule is not changed,
    2) The tax schedule is not changed,
    and
    3) The economic growth rate is not as great in the future as it was between the end of WWII and 2000.
    If the growth rate matches the growth rate during Democratic presidential terms since 1948, the Social Security fund will remain solvent as far in the future as we can see.