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