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Market Steamroller


Russell

Bush & Wall Street are

about to turn a phony Social Security crisis into a real one.

Part one, the tax cut, has

already been accomplished. The combo of the $1.3 trillion tax cut and a lagging

economy are shrinking federal surpluses available for both Social Security and

Medicare. According to a report issued by the consumer health organization

Families USA, the President’s proposed budget would divert $526 billion over the

next 10 years out of the Medicare Trust Fund, and those funds would become

available to the government’s general fund. Additionally, because of this

diversion, Families USA estimates the Trust Fund would lose approximately $172.5

billion in interest payments over the same period as the Trust Fund’s reserves

are depleted. All this has led Families USA to call Bush’s plan “Medicare

Euthanasia.”

Not all agree that the

funds are gone but Kent Conrad (D-N.D.) and the top Democrat on the House Budget

Committee, Rep. John Spratt of South Carolina, say the recently enacted tax cut

and Republican spending plans would erode the Social Security and Medicare trust

funds by up to $5 billion in 2003 and 2004.

Part Two, the partial

privatizing of Social Security is now underway. The stock market may be bouncing

but that hasn’t thwarted Bush’s effort to remake the Social Security system to

allow individuals to invest in stocks and bonds. According to news accounts, he

has directed his hand-selected commission to report back to him in the fall

“with specific plans for creating personal investment accounts within the

government retirement program.”

The marketization

steamroller is gearing up.  Conservatives have primed the Cato Institute and

other think tanks to pump out Social Security crisis papers based on the

“free-market” utopia Bush and his Wall Street supporters propose.  The Concord

Coalition and the Third Millenium have been bashing Social Security for some

years now. Most recently, a new group, the Coalition for American Financial

Security plans to raise funds “in the $100,000 and $250,000s” from insurance

companies, mutual fund firms and financial services. (Washington Post, 6/17/01)

As Dean Baker and Marc

Weisbrot eloquently explained in their book “Social Security: The Phony Crisis,”

all the brouhaha is to provide the moral and intellectual basis for weakening,

then destroying a public system that has actually worked to reduce poverty

amongst the elderly and disabled members of our society.

The White House, Congress,

the media, and general public tends to see Social Security predominantly in

terms of retirement, but roughly one-third of all beneficiaries are non-retirees

— they receive benefits as Survivors (SI) or through Disability Insurance (SSDI).

A study by the Government Accounting Office on the Bush plan already has

concluded that “even under the best of circumstances, Social Security reform

proposals would reduce benefits” for disabled people.  For a worker with average

earnings who first receives disability benefits at the age of 45, the report

said, the reduction in lifetime benefits would be in the range of 4% – 18%. The

average benefit for disabled workers is now $786 a month.

OK I’ve complained about

the fact that Social Security disability benefits are miserably low — seemingly

inexcusable in a nation as rich as the US but an outcome of class relations:

“the inadequate safety net

is a product of the owning class’ fear of losing control of the means of

production; the American work ethic is a mechanism of social control that

ensures capitalists a reliable work force for making profits. If workers were

provided with a social safety net that adequately protected them through

unemployment, sickness, disability, and old age, labour would gain a stronger

position from which to negotiate their conditions of employment. American

business retains its power over the working-class through a fear of destitution

that would be weakened if the safety net were to actually become safe.”

(Russell, Beyond Ramps)

But the current Social

Security formula is better than what the Bush plan would usher in. The GAO

report said that “income from the individual accounts was not sufficient to

compensate for the decline in the insurance benefits that disabled beneficiaries

would receive” under the major reform proposals.

This is because disabled

persons typically have shorter work histories and would have less time to

accumulate money in their accounts.

Private investment of

Social Security dollars may work for someone who has a solid and steady income

for 40-plus years (provided the market doesn’t go south — there are LONG

periods when the stock market does not increase at all or actually declines,

then there are individual bad investments), but what happens to people who enter

the Social Security rolls earlier in life due to disability? Limited personal

investments based on a truncated work history will be inadequate to cover living

expenses for the rest of one’s life.

Social Security disability

is broad and inclusive because it is a universalized approach which is not a

part of the commodities market. Not being market-based, it does not have the

draw backs of private insurance which sells disability policies as a “product”

and must make a profit from the sale. The insurance industry first studies data

and calculates rates that will assure profits. It is not a generous process, it

is not a just process, rather it is a capitalist game where the "winners" are

the companies which get the highest returns possible.  A disabled person can pay

an extremely high price for minimum or limited coverage which still may

subjected to a challenge by the insurer upon making a claim.

Not that there are not

procedural problems with the administration of Social Security disability, but a

worker’s FICA tax, by contrast, buys not only retirement benefits but disability

benefits and survivor’s benefits if the worker dies leaving dependents. 

As attorney Harriet

Johnson explains “The comparisons of private investment to Social Security leave

these other benefits out of the equation.  While we might do better investing

our FICA tax privately so far as age-65 retirement is concerned, when we factor

in disability and survivor coverage, there is nothing in the private market for

anyone — at any age, any level of health — to get the level of income

protection they get from Social Security for what they pay in FICA.”

During the 20s-40s,

insurance companies experimented with offering disability benefits and failed

miserably.  Edward Berkowitz illustrates how private insurers tried to squeeze

profits from disability insurance in his Twentieth Century Fund study, Disabled

Policy:

“They [insurance

companies] tightened the definition of disability, lengthened the waiting period

before a disabled person could begin to receive benefits, refused to sell

policies to women, and restricted benefits to those who became disabled under

the age of fifty-five. In other words, they offered limited protection and

attempted to take only the very best risks. Even so, they lost money.”

In New York, New Jersey,

Puerto Rico and Rhode Island, workers are covered by private disability

insurance through their employers, who are required by law to provide

*temporary* coverage. Employers in many other states voluntarily provide

disability; to some extent, it takes pressure off them to continue extended sick

pay.  The period of disability covered by an employer’s policy, however, may be

as short as a month or two. Some employers, and many other groups, offer

participation in supplemental disability plans, which can also be purchased on

an individual basis.  The three main types of supplemental disability insurance

products are:

Noncancellable, which

continues to protect you as long as you continue to pay premiums; benefits may

increase with income;

Guaranteed renewable,

which only guarantees the availability of coverage but not the premium amount;

and

Optionally renewable,

which is analogous to term insurance in the sense that each year you and the

insurer consider a new contract with new terms.

Almost all plans are

premised on one having a certain amount of savings tucked away for a rainy day.

They are expensive to buy and can prove hard to collect on a claim.  Insurers,

in general have relied on shifting costs of permanent disability onto the Social

Security system rather than taking the responsibility for providing guaranteed

universal disability coverage.

Private insurance

corporations also play underwriting games with the disabled population in the

medical and life insurance insurance arenas. Disabled persons bear the brunt of

a discriminating private insurance market which may sell them something but

often sells them an inferior policy to what nondisabled persons can buy. 

Insurers may limit benefits, restrict the coverage.  The insurers can cap

policies so disabled persons may be sold an inferior bill of goods, a limited

selection of a product to assure corporate profits.  Insurers, for example, can

discriminate against people with AIDS by refusing to pay for them the same

expenses it would pay if they did not have AIDS. (Doe v. Mutual of Omaha

Insurance Co., 7th Circuit Court) 

Or insurers may rake

disabled policy holders over the coals when it comes to what they charge –

offering coverage at a higher-than-standard premium (a “surcharge” or “rate-up”)

In the case of Howard Chabner, a lawyer who uses a wheelchair, United of Omaha

Life Insurance Co charged nearly double the standard life insurance premium. 

Chabner and his attorneys asked the Ninth U.S. Circuit Court of Appeals to rule

that charging a disabled man an arbitrarily high life insurance premium violates

federal and state laws on equal access to public accommodations under the ADA.

The insurance

corporations, however, complained bitterly. United of Omaha’s brief warned that

a ruling for Chabner would open the

floodgates: “If the ADA is

found to apply to the underwriting and content of insurance policies — and not

merely access to an insurance office — it will effectively mean that the goods

and services of every business in America will be scrutinized under the ADA.”

The Circuit Court found

that United discriminated against Chabner by charging him a life insurance

premium twice the amount charged to a non-disabled man because it did not rely

on experience or upon data when determining the premium to charge Chabner;

United based its determination solely on his disability (state law did regulate

the sale of insurance and that a similar defense was required by the insurer,

who did not meet the defense and so was still liable for gauging Chabner).  But

the court ruled that the ADA does *not* regulate insurance practices.  If United

were to come up with sound actuarial data, theoretically it could charge a

disabled person more and this would not be discrimination.

What does that do for

disabled persons whose disabilities could be a basis for such underwriting

formulas — like many of those now surviving on Social Security, for instance? 

Insurance corporations can still find ways to eliminate the disabled population

from the insurance pool by making the terms unaffordable or insufficient to meet

one’s needs.. 

Public disability benefits

were set up in the late 1950s in large measure to correct these “market

failures”, to provide a safety net that capitalism did not permit and does not

permit to this day for the disabled population. 

Creating a “new investor

class” as the Bush minions put it by taking the money out of the Social Security

funds will deplete what is available for disability benefits.  Privatization

will reduce the revenue going into the Trust Fund from the entire population

making it much more difficult to maintain benefits to disabled persons and

survivors over the long haul as more people opt out of the system.

Public disability benefits

will deteriorate.  Disabled persons on these programs, already perched on the

edge of survival, cannot afford to have their checks shrink.  The market

steamroller is pressing the phony crisis into impending one.

Marta Russell can be

reached at [email protected]

www.disweb.org

 

 

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