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12/17/2004

Union Activists: Protect Social Security—Not Tax Cuts for the Rich

Working families are calling on President George W. Bush to abandon his scheme to privatize Social Security and instead shore up the nation’s most successful family protection program by requiring the wealthiest Americans to pay their fair share into the system.

“Instead of dismantling Social Security, we should consider plausible solutions,” AFL-CIO President John J. Sweeney said at a Dec. 16 news conference in Washington, D.C., joined by advocates for seniors, women, African Americans and people with disabilities. “Congress could make a substantial down payment on the system with some of the money that Bush wants to use to pay for permanent tax cuts for the wealthy.”

Bush should transfer the revenue from the estate and gift tax each year to Social Security, said Sweeney. The Bush administration should back federal legislation that redirects revenue by taxing large estates rather than completely eliminating the estate tax. Under current law, big cuts in the estate tax are being phased in so that by 2009, estates worth up to $3.5 million for individuals (up to $7 million for couples) will be exempt from the estate tax, and the tax rate on estates worth more than those amounts will drop to 45 percent. If Congress does not eliminate the estate tax, the resulting revenue could provide a major source of support for Social Security.

In addition, Congress could make the highest wage earners pay their fair share to Social Security by raising the cap on earnings subject to the payroll tax, said Sweeney. Today, workers and employers pay Social Security taxes on the first $87,900 of their annual incomes (a figure that will rise to $90,000 in January). All or part of wages above the current cap could be subject to the Social Security payroll tax.

Future Benefit Cuts Likely if Social Security Is Privatized

President Bush wants to divert some Social Security contributions to private accounts, which would lead to future benefit cuts for retirees, people with disabilities and surviving families of deceased workers who rely on the nation’s most successful family insurance program, according to the Center on Budget and Policy Priorities. More than 47 million Americans get benefits from Social Security.

In addition to cutting benefits, Bush’s privatization plan would lead to an increase in the retirement age, increase the federal deficit and expose retirees to the risks of the stock market.

While retirees would see their benefits tumble under Bush’s privatization plan, Wall Street firms would enjoy a whopping $940 billion windfall over 75 years, according to a report this fall from Austan Goolsbee, an economics professor at the University of Chicago Graduate School of Business. Although the Securities Industry Association, a coalition of financial services companies, disputes Goolsbee’s findings, it still admits firms would reap as much as $279 billion over 75 years from fees.

Working Families Call on Financial Industry to Oppose Privatization Scheme

Working families also are calling on the financial industry to oppose Bush’s scheme to privatize Social Security. Because banks, mutual fund companies and insurance agencies would reap billions of dollars in fees if Social Security is privatized, they have a conflict of interest if they support such plans, say union activists and their allies.

“The only group that would benefit from privatization is the financial services industry,” said Sweeney. “It is unconscionable for firms that handle the investments of working Americans to support an ill-advised plan that will slash guaranteed benefits for retirees.”

Sweeney sent a letter to 46 financial services firms asking them “to publicly disavow support for Social Security privatization” and to support maintaining America’s safety net for retired workers, people with disabilities and survivors. He noted that State Street Corp., a huge investment firm once on the forefront of supporting privatization, reversed its position two years ago and now opposes private accounts.

“We believe that the current payroll tax revenue stream for Social Security should not be diverted from current-law retirement, disability and survivor benefits to create private retirement accounts,” says a Jan. 30, 2002, statement from State Street.

Bush’s Economic Summit a ‘Public Relations Gimmick’

Advocates for strengthening Social Security made their voices heard on the same day Bush met with a hand-picked group of political supporters and economists in the nation’s capital, where he continued his campaign to privatize the nation’s most successful and comprehensive family protection program and transform it from a guaranteed safety net into volatile accounts subject to the whims of the stock market.

“This week’s so-called economic summit is not really a conference to discuss pressing issues facing working Americans,” said Sweeney. “This is just another public relations gimmick to promote the president’s damaging proposal to privatize Social Security.”

“Privatization is not the answer to saving Social Security,” said George Kourpias, president of the Alliance for Retired Americans, a nationwide grassroots advocacy organization for seniors. “We won’t put up with a government that would use us as part of a political experiment,” Kourpias said at the news conference. “Diverting money into private accounts will bleed the Social Security system to death.”

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