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April 2004 • Vol 4, No. 4 •

The Insecurity of Social Security

By Nat Weinstein

Only the politically blind cannot see that the attacks on the living standards of working people are not only being intensified in the workplaces of the country, but that the anti-labor offensive is being extended into every possible sphere of the social and economic infrastructure of global capitalism.

In addition to the capitalist assault on workers at the point of production, the steady reduction in income taxes paid by the rich and superrich inevitably results in corresponding increases in taxes extracted by the world’s capitalist governments from workers’ paychecks. One of the cruel-est of these assaults is being directed against those who are most dependent on Social Security (SS) and other “entitlements” to survive in today’s ever-worsening economic environment.

First quarter Labor Department reports of “308,000 new Jobs in March,” must be taken with a grain of salt, since it was also reported that there was also an increase in unemployment.

The so-called Social Security system, it’s important to note, was introduced at the height of the Great Depression. But not out of concern for the extraordinary suffering of the masses of unemployed at that time. On the contrary, it was only after the great labor upsurge of the 1930s exploded with victorious citywide strikes in three important American cities in three key industries in 1934 that Congress enacted the first legislation inaugurating the arrival of Social Security.

It was hardly an accident that Congress first enacted this legislation in 1935, after five years of the Great Depression, but less than a year after the last of the three historic strike victories. What indubitably motivated the capitalist government at that time was fear that the strike wave would precipitate a major offensive by workers to gain new ground with no limits in sight. They had vainly hoped to slow down this very dangerous development by offering up the promise of genuine social security.

Neither was it an act of charity. The legislation enabling the introduction of the SS system had at its outset established the principle that workers would finance it. And as we shall see, it has been solely financed by workers—despite claims to the contrary. The legislation originally provided for a 1 percent deduction out of workers’ paychecks to finance a system that eased the pain of capitalism’s victims somewhat. But in no sense did it provide anything like real security for the great majority of the working class then or now.

That’s why it is more accurate to describe what is touted as a guarantee of social security as being in reality the social wage of the working class coming directly from wages, but only partly returned. That is, unlike all private retirement funds, the workers’ social wage is, in effect, deposited in a non-interest bearing fund!

Moreover, the innovation of the principle of deducting a tax from workers paychecks had profoundly adverse consequences. It opened the door to the withholding tax also deducted from paychecks. Otherwise, if workers had to come up with an income tax payment at the end of the year—as all others are required to do—workers, most of whom live from paycheck to paycheck, could not pay an income tax.

But at the same time, aside from the occasional use of the term, “entitlements,” to describe the benefits bought and paid for by workers, Social Security is more often than not treated by the mass media as though it were a gift generously granted to workers by those who make the laws of the land. But as the bible says, what the Lord giveth, the Lord can also taketh away. In other words, while the property rights of capitalists are considered sacrosanct, and a debt is a debt and must be paid back, the property rights of the working class—not to mention their human rights—is not inviolable.

History’s pendulum swings both ways

However, when the relation of forces between labor and capital shifts in favor of one or the other of the two contending classes, the side that manages to gain the upper hand invariably begins to take back whatever gains had been previously won by the opposing class in an earlier phase of the class struggle. And the two most recent swings of the pendulum of history—the first, in 1934, with the beginning of the great labor offensive against capital, and the second in 1947, when Congress enacted the Taft-Hartley “slave labor” law, is a perfect example of the see-saw nature of the class struggle. That last swing of the pendulum—57 years ago—marked the opening of a prolonged capitalist counter-offensive that continues to the present day.

But as has often been noted in these pages, the tide could not have been turned in favor of capital without the indispensable aid and assistance of the labor lieutenants of the capitalist class.

The dominant sector of the labor bureaucracy had initially spoken out sharply in opposition to what they themselves had dubbed a “slave labor law.” But, rather than mobilizing the labor movement for a battle in defense of their past gains, the dominant section of the labor officialdom endorsed the two key provisions of the slave labor law.

First, they endorsed the requirement that all elected union officers must sign an oath that they were not now, nor had they ever been, members of a communist-dominated organization, or be barred from holding an elected union post.

Given that this notorious oath occurred at the very height of the Cold War, when the threat of nuclear annihilation hung over the peoples of the world, it allowed capitalism and its labor lieutenants to drive working-class militants out of their leadership positions in the unions. Union democracy was sharply constricted.

In other words, it not only gave the bosses and their government the right to remove leaders who were democratically elected by union members, but the labor bureaucracy also gave the bosses their enthusiastic support in removing the union’s most militant leaders.

Moreover, the dominant sector of the labor bureaucracy endorsed a provision of the slave labor law making union solidarity during strikes illegal. That is, it became a crime for union members and their unions to recognize and refuse to cross the picket lines of sister unions.

But let’s look a little more closely at the current attack on the social wage of the working class.

Government misappropriates the social wage

Despite the avalanche of media reports in recent years of the imminent bankruptcy of the Social Security fund, the plain facts tell us that workers have paid many more dollars into the Federal Treasury than the amount paid out in benefits. In fact, enough money was paid into the fund to more than adequately maintain the stability of the fund for many decades to come—including when the so-called baby-boom generation reaches retirement age.

But the accumulated surplus over the amount in the SS fund distributed in benefits each year, has long ago been transferred into the U.S. Treasury and has been spent as fast as it has been collected. Thus, the surplus is gone; having been spent on everything but the purpose for which it had been collected—leaving nothing but worthless Federal Government-“backed” IOUs in its place.

In other words, rather than the SS surplus accruing interest as does any privately held insurance fund, the portion of interest that would have gone into the SS fund, along with the fund itself, has in effect been transferred instead to the capitalist class—the purpose being to compensate for the slashing of taxes on the rich and superrich—as well as putting what belongs to workers in the pockets of bankers and other big-time capitalists.

But that’s not all. Tthe bulk of the tax on wages and salaries comes from the most exploited sectors of the working class; that is, the overwhelming majority who earn an annual wage or salary of $87,900 or less.

That is, the SS surplus comes for the most part from the 7.5 percent tax on gross wage and salary income that is deducted only from the first $87,900 of the total earnings of each employee. But why do they stop at $87,900? Why not tax all wage and salary income?

This is why:

The many families with one, two or more breadwinners, who together might earn as much as $87,900 in a year, will have a full 7.5 percent of their entire annual income deducted from their paychecks for the SS tax, amounting to a total of $6,973. Corporate executives, however, with salaries of as much as $1,000,000, or more, also pay only a $6973 tax—or less than one percent of their million-dollar salaries.

Moreover, to make sure that every cent earned by the great majority of the working class is paid, the taxable portion of wages and salaries has been periodically raised by Congress to offset the declining value of the dollar in order to insure that only the great majority who must work for a living would have their entire income taxed.

It’s a perfect example of the simple truism made famous by the French novelist and social critic, Anatole France (1844-1924): “The law, in its majestic equality,” he wrote, “forbids all men to sleep under bridges, to beg in the streets, and to steal bread—the rich as well as the poor.”





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