Testifying at a U.S. Senate Commerce, Science and Transportation Committee hearing, former Enron Corp. employee Janice Farmer became emotional when she described the plunge of her $700,000 retirement fund to $4,000 during the company’s high-profile, allegedly corruption-ridden collapse. “I cannot help but feel that I and thousands of employees like me have been lied to and cheated,” Farmer told the senators Dec. 18.

The 61-year-old widow finds comfort in the only retirement support she can count on: Social Security. In one year, she will begin receiving monthly checks from the nation’s most successful family protection program. “It is extremely important for seniors to know they’ve got Social Security,” said Farmer in a telephone interview from her Orlando, Fla., home. “I’m very thankful that Social Security is in my future.” For now, Farmer is making ends meet by counting on a $63 monthly pension check from a previous employer.

Farmer and 11,000 other Enron employees found out too late they could not count on the stock market or their employer for a guaranteed retirement—and if President George W. Bush and his corporate backers have their way, workers in the future may not even be able to count on Social Security.

Dismantling Social Security
During his campaign for president, Bush backed privatizing Social Security. Last May, he hand-picked a 16-member commission, asking them to come up with a plan to convert the guaranteed, secure family protection program into a system that included individual stock market accounts. Headed by former U.S. Sen. Daniel Patrick Moynihan (D-N.Y.) and AOL/Time Warner executive Richard Parsons, the commission was made up solely of people who favored privatization.

In December, after meeting for seven months, the president’s privatization commission offered three options for turning a portion of the program that has never once missed a paycheck into a Wall Street gamble. The proposals either effectively raise the retirement age, cut benefits or both. “Each path would lead to the same bad results: reduction of benefits, deep financial risks for all beneficiaries and further jeopardy for minorities, persons with disabilities, women and low-income workers,” says Ed Coyle, executive director of the Alliance for Retired Americans, the union organization for retired workers.

	While many view Social Security as a retirement program, working families also count on it as a disability and life insurance safety net: Fully 14 percent of Social Security recipients receive benefits because they have disabilities and another 16 percent are the surviving spouses or children of workers who have died.

Wall Street is among the biggest backers of privatization—and no wonder: Corporate oversight of Social Security would result in millions of dollars in fees for banks, insurance companies and investment firms. Administrative costs for private insurance policies offer a glimpse of what might be expected if Social Security were privatized. The costs range from 12 percent to 14 percent, according to the American Council of Life Insurers. By contrast, just 1 percent of Social Security funds go toward administration. Last summer, business groups dubbing themselves the Coalition for American Financial Security came together to launch a public relations campaign for privatization that the Wall Street Journal reported would cost $20 million. But in the face of spirited protests from working families and seniors, the group backed off its plans.

Advocates for workers agree that private savings are an important part of retirement security. In fact, activists often describe workers’ retirement security as a three-legged stool: personal savings, pensions and Social Security. All three need to be strong if workers are to have a dignified retirement after a long life of work—but all three are under attack by corporate interests. Of the three, only Social Security provides the core foundation that all workers can rely on.

For many years, employer-provided pensions took the form of defined-benefit plans, which are insured by the U.S. government and guarantee workers specific monthly benefits as long as they live after retirement. But about 20 years ago, employers increasingly shifted to programs such as 401(k)s, or defined-contribution plans, transferring the risk and burden of retirement saving to workers. Partially as a result, Social Security has become the largest source of income for seniors: 63 percent of older Americans count on Social Security for half or more of their income, according to the Social Security Administration. But the commission’s privatization scheme would siphon funds from the Social Security system, eroding the safety net for all workers—even those who chose not to open individual accounts.

		From America@work, March 2002.

Can’t count on the stock market
The Enron debacle dramatically illustrates what can happen when corporations—largely unaccountable to the public and increasingly defiant of standards of acceptable behavior—choose greed over providing employees with job and retirement security. The company’s spectacular bankruptcy and massive alleged corporate wrongdoing decimated workers’ 401(k) funds. As the energy retailer’s stock value plummeted, executives cashed in but barred employees from selling company stock in their 401(k)s. And because lots of pension funds held Enron stocks, the retirement funds of thousands of other workers lost billions of dollars, too.

Yet even workers who don’t face a cor-poratewide bankruptcy can’t count on Wall Street for their retirement security: After four years of annual double-digit gains, the stock market began a steep decline two years ago, with the Standard & Poors 500 index dropping 9 percent in 2000 and 12 percent in 2001. A recent analysis of 8.3 million investors by the Investment Company Institute and the Employee Benefit Research Institute showed the average 401(k) retirement savings account shrank by 0.1 percent, or $76, from 1999 to 2000. While the drop appears small, it was the first time a decline was recorded since 401(k) plans came into existence about 20 years ago. And for workers in their 60s who are preparing to retire on their accumulated retirement savings, the drop was much larger—eliminating 5.8 percent, or $7,034, of a typical balance. In comparison, Social Security benefits rise with inflation and are guaranteed for a lifetime—providing safety that private investments can’t match.

Bush plan would raise retirement age, cut benefits
In its first few months, the President’s Commission to Strengthen Social Security met in venues open to the public. But after rallies by union activists and their allies demanding the commission strengthen, not dismantle, Social Security, commission members began gathering behind closed doors— using legal loopholes that allowed them to meet away from public scrutiny.

During these closed-door sessions, the commission arrived at recommendations that would cut benefits and force people to work longer in order to get full retirement benefits—while not addressing long-term funding for the program.

One plan effectively would raise the retirement age because it indexes the retirement age to longevity increases and creates penalties for retiring “early.” By permanently cutting benefits to those who retire before they qualify for full benefits (the retirement age already is going up from 65 to 67 gradually under current law), the commission plans would penalize people in physically demanding careers and those who couldn’t find work after losing their jobs.

Another of the commission’s plans also would cut Social Security benefits by making a technical change in the way benefits are computed. Under that option, workers who are 28 years old today and retiring in 2040 would see their benefits shrink by about 30 percent, according to an analysis by the Institute for America’s Future. Today’s toddlers would suffer even more when they reach maturity: Their benefit cuts could be as high as 48 percent. “This is a drastic change in Social Security that would mean workers could no longer maintain the same standard of living in retirement as they had during their working years,” says AFL-CIO President John Sweeney.

The same “technicality” in that proposal would sharply reduce benefits to those who receive Social Security because they have disabilities or are survivors of workers who have died, ignoring Bush’s promise to preserve these programs. While many view Social Security as a retirement program, working families also count on it as a disability and life insurance safety net. Fully 14 percent of Social Security recipients receive benefits because they become disabled on the job. Another 16 percent are the surviving spouses or children of workers who have died.

Privatizers aren’t the only danger to the health of Social Security. On Feb. 4, President Bush released a federal budget proposal for 2003 that projects Washington will need to divert $1.5 trillion in workers’ Social Security payroll contributions to fund other programs over the next 10 years. During the 2000 presidential campaign, Bush promised to keep Social Security in a “lockbox” and not use it for other purposes. But Bush broke his promise in order to finance a $1.6 trillion tax cut for the wealthy—almost the exact amount of Social Security money that he plans to use instead. A February Los Angeles Times poll found that 81 percent of the public opposes using Social Security revenue to fund future scheduled tax cuts. Check out www.aflcio.org for more on the Bush budget.

Even by eroding all these benefits, the commission’s plans still wouldn’t create sufficient funding to sustain the Social Security system. Analysts say the commission’s partial privatization plan could drain the program of $1 trillion during the next 10 years. The commission doesn’t address how that cost would be met. Privatizers had hoped they could use the federal budget surplus to make up at least some of that loss. But in part because of Bush’s $1.6 trillion tax cut directed primarily to the wealthy, the United States faces a federal budget deficit throughout the decade. If only half of the money spent on the tax cut over the next 75 years was spent on Social Security instead, the program would be financially solvent for that period, according to the Center on Budget and Policy Priorities.

For more than three years, many corporations, industry groups and the politicians who share their agenda have had the luxury of trying to build support for privatizing Social Security without explaining how they were going to do it. Now, Bush’s commission has unwittingly shown how destructive privatization would be.

“The commission report makes it clear that you can privatize Social Security only if you cut benefits and likely raise the retirement age,” says Roger Hickey, executive director of the Institute for America’s Future, which will launch a campaign urging congressional candidates to take a stand against the plan. “The commission is admitting privatization doesn’t solve Social Security’s problems but that it actually makes them much worse.”

As privatizers met behind closed doors devising schemes to dismantle Social Security, families that had suffered devastating losses in the wake of Sept. 11 learned the importance of having a safety net they could count on in a time of crisis. Thousands of people—the children who lost a parent, the parent who lost a spouse, the worker who was left disabled—are entitled to Social Security benefits. The first of them received benefit checks Oct. 3. As many private charities scrambled to aid victims after Sept.11, “the first checks people got were from the Social Security Administration,” says Suzy Ballantyne, New York State AFL-CIO political director, who has been working with victims’ families.

“Social Security is there for them when they need it.”