The following excerpt is from the 2002 book Banking on Death, or Investing in Life: The History and Future of Pensions, by Robin Blackburn, pp 387-89. It is for wonks only. I am not going to fancy it up with pictures nor explain anything to anyone, save one comment: In the 1990’s, what they called “New Democrats” are now known as “Conservadems”, or “Blue Dogs.” The footnotes are the author’s. 
…The dilemma posed by Social Security was different. There was business backing for privatization but it was not yet overwhelming. In the absence of an agreed path to privatization the financial corporations were cautious, fearing that they could be lumbered with a large number of unprofitable small investors. Clinton had pleased his constituency by giving them something they really wanted – a large cut in capital gains tax – and for the time being most were content. Nevertheless, there was still a definite ideological and cultural impetus towards privatization. The extraordinary buoyancy of the stock market was giving added appeal to the idea that the program’s difficulties could be fixed by personal accounts. Prominent economists were coming forward with detailed blueprints. We will shortly consider the scheme drawn up my Martin Feldstien. But since Feldstein inclined to support the Republicans, it was also significant the Laurence Kotlikoff of Boston University and Jeffrey Sachs of Harvard produced a partial privatization plan for Social Security in 1997. These men were closer to [Larry] Summers and other figures in the administration, and had both served, with Washington’s approval, as advisers to the Russian government.
At a conference held at Harvard in June, 2001, former staff members of the Clinton Administration presented papers explaining that plans for partial privatization or mandatory private provision had been intensively prepared in 1997-98 but abandoned prior to the State of the Union address in 1999. A newspaper report explained:
President Clinton and his economic advisers spent 18 months secretly discussing the elements of a plan to add individual accounts to Social Security, but abandoned it when it became clear the president would be impeached … Throughout 1998 a working group met once or twice a week, with the agenda disguised on official schedules, to discuss options and has out details of a proposal. The president was briefed every six weeks.(1)
The so-called ‘Special Issues’ task force was set up by Larry Summers and Gene Sperling, the chair of the Council of Economic Advisers. While some of those involved favored privatization anyway, there was also the political objective of devising a reform that could bring together Republicans and New Democrats. One of the papers, written by the of the aides involved, makes it clear that this was believed to require mandatory private accounts: ‘For example, one option was for worker to indicate their choice of a private sector fund manager on their 1040 tax form. The working group’s estimates were at the level of detail that it was determined how many digits an ID number would have to be for each fund and how many key strokes would therefore be required to enter all the ID numbers each year.’
… But it was not technical or design questions which eventually doomed the working party’s efforts. In the event Monica Lewinsky sabotaged the privatization cause. As the aide explains:
Toward the end of 1998, as the possibility that the President would be impeached came clearly into view, the policy dynamic of Social Security debate changed dramatically and it became clear to the White House that this was not a time to take risks on the scale that would be necessary to achieve a deal on an issue as contentious as Social Security reform. The President decided to follow a strategy of trying to unite the Democrats around a plan that would strengthen Social Security by transferring some of the budget surpluses to Social Security and investing a portion of the transferred funds in equities. (2)
A paper by a different group of Clinton aides further explained that the political situation by no means deterred the White House from courting controversy” ‘Put simply, the communications and political staff at the White House were enthusiastic about anything, including Social Security reform, that would divert attention from the scandal. Clinton evidently decided that it would be better to advocate controversial means for saving Social Security than to arouse a different sort of controversy that would have attended a privatization bid.
_____________
(1) Thomas E. MacUrdy and John Shoven, ‘Asset Allocation and Risk Allocation: Can Social Security improve its future solvency problem by investing in private securities?, in John Y. Campbell and Martin Feldstein eds, Risk Aspects of Investment-Based Social Security Reform, Chicago and London, pp 11-32.
(2) Jim Stanford, Paper Boom, Ottawa 1999, p. 349
Piece of Mindful 
Bank robbers rob banks because that’s where the money is. Wall Street robs anyone and everything that isn’t nailed down, yet almost nobody ever goes to jail. The Wall Street elite drool over that Social Security revenue stream, even as they are exempt from paying into it over the $90,000 income cap. Remove the cap, problem solved, but that’s obviously not the objective. This (regulatory capture, subsidies, capital infusion, and numerous other forms of special treatment, etc.) sure is a far cry from capitalism, but what should we call it? The ghouls are coming for America’s rotting corpse, but when?
LikeLike
Trust in Dems/SS evaporated long bsfore now. A little history lesson.
Your Social Security
Just in case some of you young whippersnappers (& some older ones) didn’t know this. It’s easy to check out, if you don’t believe it. Be sure and show it to your kids. They need a little history lesson on what’s what and it doesn’t matter whether you are Democrat or Republican.
Facts are Facts!!!
Social Security Cards up until the 1980’s expressly stated the number and card were not to be used for identification purposes.
Since nearly everyone in the United States now has a number, it became convenient to use it anyway and the message was removed.
An old Social Security card with the “NOT FOR IDENTIFICATION” message.
Our Social Security
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) That participation in the Program would be completely voluntary,
No longer Voluntary
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
Now 7.65% on the first $90,000
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
No longer tax deductible
4.) That the money the participants put into the independent ‘Trust Fund’ rather than into the general operating fund, and therefore, would
only be used to fund the Social Security Retirement Program, and no other Government program, and,
Under Johnson the money was moved to The General Fund and Spent
5.) That the annuity payments to the retirees would never be taxed as income.
Under Clinton & Gore Up to 85% of your Social Security can be Taxed
Since many of us have paid into FICA for years and are now receiving a Social Security check every month — and then finding that we are getting taxed on 85% of the money we paid to the Federal government to ‘put away’ — you may be interested in the following:
———— ——— ——— ——— ——— ——— —-
Q: Which Political Party took Social Security from the independent ‘Trust Fund’ and put it into the general fund so that Congress could spend it?
A: It was Lyndon Johnson and the democratically controlled House and Senate.
———— ——— ——— ——— ——— ——— ——— —
Q: Which Political Party eliminated the income tax deduction for Social Security (FICA) withholding?
A: The Democratic Party.
———— ——— ——— ——— ——— ——— ——— —–
Q: Which Political Party started taxing Social Security annuities?
A: The Democratic Party, with Al Gore casting the ‘tie-breaking’ deciding vote as President of the Senate, while he was Vice President of the US
———— ——— ——— ——— ——— ——— ——— –
Q: Which Political Party decided to start giving annuity payments to immigrants?
AND MY FAVORITE:
A: That’s right!
Jimmy Carter and the Democratic Party. Immigrants moved into this country, and at age 65, began to receive Social Security payments! The Democratic Party gave these payments to them, even though they never paid a dime into it!
Then, after violating the original contract (FICA), the Democrats turn around and tell you that the Republicans
want to take your Social Security away!
And the worst part about it is uninformed citizens believe it!
LikeLike
Yes, much has changed, and I don’t give a rat’s ass which party made the changes. That’s your own fantasy, as you must know by this time that I regard the two parties as one.
And, let me-reemphasize, as I think you missed it, that what I outlined in this post was a covert attempt by Democrats under Clinton to take away our Social Security. You do know that, right? This post was a shot at the Democrats.
The rest I think is too complicated to go into, as your entry was cut and paste, and it seems that we’ve covered this ground before.
But when Social Security was first passed, the only reason the business community went along with it was that it would be a tax on the working class only. Only wages are taxed, and the current ceiling is $106,000, and the effective rate of tax is 11.7%. Your 7.65% is the “employee’s share”, and includes Medicare.
But the biggest mistake that you are making has to do with the 1983 Reform Law – that is where the tax and ceiling were raised to the current level. It was the single largest tax increase in history, signed into law by Ronald Reagan.
It was at that time, in the 1983 law, that benefits were first taxed – at that time, when other income + SS exceeded $25,000 for singles, $32,000 for marrieds’ That’s still in force and the numbers have never been adjusted for inflation, so that taxes for seniors automatically go up each year.
Reagan did that. Got that?
Swede? Swede? Where did you go, Swede? Sweeeeede?
LikeLike
Moved to one of my other houses without internet access (until today).
I’ve often been chastised by you when I stray away from the subject at hand. Your title-“Why Dems should not be trusted with SS” fits perfectly with my response, even without invoking Reagan.
Since you unearthed the zombie and since employment or the lack of seems to be on everyones mind maybe we should revisit Reagan’s record. A record which boasts 11.5 M jobs in the first 4 years of recovery.
Here’s a bonus graph that compares him to Billy who benefited from Ronny and a spike in technology.
Reagan may have signed the bill resulting in a large increase in taxes (largest yet to come) but how does that compare to the incremental advances of 1% to 7.65%?
Mouse fart in a wind storm.
LikeLike
Swede: Your selective history serves you well. Reagan dropped the top income tax rates at the same time that Volcker had raised interest rates, the result was a massive recession, almost as bad as the current one. Deficits soared. They then pretended that Social Security was in crisis because they had dropped taxes on the wealthy and needed to recover lost revenues. That’s when Social Security taxes on ordinary working people were bumped, and the critical thing is this: in 1983 the tax was $3,659 for the top wage earners. In 2010 it is $15,052.
That is a 411% tax increase. Justify! Reagan did it. Everything was hard-wired when he was in office.
Due to the tax breaks plus his defense spending, deficits soared, and national debt, which was around 909 Billion when he came into office, was over $5 trillion when he left. This does not take into account the money he also “borrowed” from Social Security.
$5 trillion will ‘create’ a whole lotta jobs, I suppose. But then, you don’t believe that stimulus works, so I don’t know what to tell you.
BTW, people also say that tax collections increased as a result of his tax cuts. First, tax collection automatically go up no matter what, but declined severely at the time of enactment, but in addition, people who say this neglect to mention that the collections that they talk about when he left office include his SS tax hike.
Here’s Thomas Kochan:
Thus endeth the history lesson. Care to talk some more?
LikeLike
I sprained my back wrestling with a refrig., can’t set and type long, so I’ll be brief.
I’ll revisit my original comment theme. Govt. can’t abide by their original commitments. Meaning, we just need income tax for the war or we need voluntary untaxed retirement program that won’t end up being spent in the general fund.
The holes in the dykes dribbled long before Reagan said the oath.
LikeLike
You do understand that the government cannot “save” money in the household sense, right? You do realize that if the government had invested the Social Security Trust Fund in private bonds and equity, that the government would end up owning large sectors of the economy.
You do realize that the “Trust Fund” is merely a legally enforceable claim by a subset of taxpayers (most workers but only below a certain level) against all taxpayers (investors, corporations, and workers at all levels).
Since you realize that, you then know that the “Trust Fund” could not be invested in the normal sense, and had to be placed, in good faith, in government bonds, or future promises of honorable people.
If you do understand all of that, then we can proceed. If not, we cannot, as you don’t know enough of the nature of the subject to be discussing it. No offense. Just is that way.
LikeLike
That right? Seems like we could use some black ink right about now.
The Treasury Department estimates that our debt to China is approximately $843 billion. That is over $10,000 in debt for the average American family.
Over the course of the next year, the government will borrow approximately $2.63 million every minute. That’s the equivalent of 8,752 flat screen HDTVs it cannot afford.
From 2010 to 2020, the Congressional Budget Office estimates the cumulative deficit will be over $9 trillion. This means that over the next decade, more than $9 trillion will be added to our existing national debt, creating a total debt of more than $20 trillion.
According to the January 2010 Congressional Budget Office report, the federal budget deficit in 2009 was $1.4 trillion (9.9% of GDP). The 2010 deficit under proposed policies is projected to be $1.5 trillion (10.3% of GDP). These are the largest deficits relative to GDP since 1945.
From 2008 to 2009, public debt rose from 41% of GDP to 53% of GDP—$7.5 trillion at the end of 2009). According to the March 2010 CBO report, under proposed policies, public debt will rise to 90% of GDP by 2020, equaling approximately $20 trillion.
About $4.4 trillion of the total debt is money that the government has borrowed from itself, by writing IOUs for huge sums taken from Social Security and Medicare surpluses.
In July of 2009, the United States paid more than $19 billion in interest on the public debt [$19,812,486,187.83, Office of the Public Debt]. In 2009, according to the CBO, $187 billion of taxpayer funds were used just to pay interest on the debt—not to pay off the debt, just to pay interest on it.
Every American worker’s share of the national debt is more than $80,000.
According to the Department of the Treasury, foreign holders of our national debt are owed a combined total of about $4 trillion (June 2010).
LikeLike
This is disjointed logic. Please explain to me why having a large trade deficit, which is in large part caused by dis-empowerment of workers, makes it impossible to honor a commitment that was made to those workers?
I know of countries where pensions are very generous, unions are strong, and that have no trade deficits.
Make sense, dammit! That’s all I ask.
The commitment to honor the pledge made in 1983 via the Trust Fund is a choice. There is no “can’t”, but only “won’t”, which is dishonorable.
LikeLike