A copy of a letter on social security from George Becker, Stephen Yokich, James Hoffa Jr. and others on, No privatization of social security.
The letter compliments of Tom Matzzie.
Your email pal,
Tom Lehman
NOTE: All Members of the House and Senate were sent the following letter from ten union presidents.
February 26, 1999 / 71129
The Honorable Richard Gephardt 1226 Longworth House Office Building U. S. House of Representatives Washington, D.C. 20515-2503
Dear Representative Gephardt,
We are writing to share with you our view regarding the President s recent proposals to address Social Security s long-term financing. Our unions endorse the President's proposal to devote a portion of future surpluses to the Social Security Trust Fund. We believe that an infusion of general revenues is an appropriate way to address any long- term funding problems the Social Security system may face, although we recognize that additional measures may also be necessary. We also applaud the President s rejection of efforts to replace a portion of Social Security s guaranteed defined benefit with individual accounts financed through payroll taxes.
However, our unions cannot support the President s proposal to allow the government itself to invest part of the Social Security Trust Fund surpluses in corporate stocks and bonds. Our opposition to this proposal is based upon five areas of concern.
First, we are deeply concerned that investment of the Trust Fund surpluses in the stock market would introduce unwise market risk into the Social Security system. Under current law, Social Security provides a rock solid guarantee of retirement income, survival and disability protections to Americans. Social Security is always there regardless of whether the stock market is up or down.
Our unions are deeply concerned that stock market investment of the Social Security surpluses would weaken this basic security and subject Americans to a much larger degree of risk. In particular, Social Security benefits or other government obligations would likely be reduced if there were a sharp market downturn.
Second, under the assumptions regarding economic growth used by the Social Security Trustees, the seven percent returns on equity investment promised by proponents of stock market investment cannot be realized. In fact, if the Trustees model were changed to accommodate this assumption regarding the stock market, the previously projected shortfall in 2032 would disappear.
The intermediate scenario of the Trustees Report assumes that in the next 75 years our economy will grow at an average annual rate of under 1.5 percent, less than half as fast as our economy has grown during the past 75 years. These pessimistic assumptions form the basis for the projections of a Social Security funding shortfall after 2032.
The proponents of privatization, either through individual accounts or direct government investment, assume a real rate of return on stocks over the next 75 years of seven percent annually. But this assumption regarding stock market returns derives from a model that assumes economic growth over the next 75 years equal to that of the past 75 years. If the economy grows fast enough to allow the seven percent stock market returns promised by the privatizers, then Social Security faces no funding problems either in 2032 or indefinitely.
One of these projections has got to be wrong. We cannot have both fast and slow economic growth in the same years. Either Social Security faces no long-term funding problem, because the economic assumptions used by the Trustees are too pessimistic, or stock market investment cannot be part of the solution, because the rate of return in a slow growing economy will be inadequate.
Third, our unions are concerned that stock market investment of Social Security surpluses will force substantial cuts in other vital federal programs. Under current budget scoring rules investment of part of the Social Security Trust Fund surpluses in the stock market would constitute a federal outlay, or expenditure, of the amount invested. Assuming that roughly $700 billion of public money is invested in the private equity markets, as proposed by the President, this means that large, painful cuts in spending would be required in other important government programs (or taxes would have to be raised by the same amount). In this era of balanced budgets and spending caps which make it difficult for our government to meet all its commitments, we cannot support the diversion of scarce public funds to the private stock market, especially when this will trigger additional cuts in many public programs which are in dire need of improved financing.
Fourth, our unions are concerned about a reduction in democratic decision-making which would be caused by stock market investment of the surpluses. Currently, in our democratic system each American has the opportunity to make his or her voice heard on questions of how we allocate public funds. To invest the Social Security Trust Fund surpluses in the stock market is to relinquish that opportunity, for American corporations are not democratic institutions. Further, unlike public investment, corporate investment decisions are not made on the basis of the public good.
In particular, we are deeply troubled that stock market investment of Social Security surpluses would result in public tax revenues being used to finance the construction of runaway steel mills in Thailand, apparel sweatshops in Malaysia, auto plants in Mexico, electronics plants in China and similar foreign projects undertaken by private corporations. At a minimum, we believe that any taxpayer funds should be invested in America. In addition, we submit that taxpayer funds should not be used to assist corporations that fail to adhere to certain standards of conduct, such as neutrality in union organizing drives, paying all their taxes, avoiding even the appearance of discrimination, providing health insurance and pension benefits and refusing to contract with businesses benefiting from sweatshops and child labor.
Fifth, our unions are concerned that the stock market investment of the Social Security surpluses could be a first step down a slippery slope to full privatization, with the investment being managed by individual Americans through private accounts. In the end, this would undermine the Social Security system, leaving workers without any guaranteed retirement income, survivor or disability protections.
Instead of considering stock market investment of Social Security surpluses, we believe Congress should consider a number of other alternatives for closing any funding shortfalls in Social Security. These include investing the Social Security surpluses in higher-yielding government bonds, devoting more of the unified surplus to Social Security, and restoring the Social Security tax base to its historic average of 90 percent of earned income.
In closing, we strongly urge you to reject all attempts to privatize any part of the Social Security system, including investment of the surpluses in the stock market. Thank you for considering our views on these vital issues of concern to workers and families.
Sincerely,
Stephen P. Yokich International President International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW)
George Becker International President United Steelworkers of America (USWA)
Bobby L. Harnage, Sr. National President American Federation of Government Employees (AFGE)
James P. Hoffa, Jr. International President International Brotherhood of Teamsters (IBT)
Ande M. Abbott Legislative Director International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers, and Helpers
Edward L. Fire International President International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE)
Brian McWilliams President International Longshore and Warehouse Union (ILWU)
Paul Almeida International President International Federation of Professional and Technical Engineers (IFPTE)
Boyd Young International President United Paper, Allied-Industrial, Chemical Union (PACE)
Cecil Roberts International President United Mine Workers of America (UMWA)