The Militant(logo) 
    Vol.60/No.45           December 16, 1996 
Washington Aims Ax At Social Security
Rigging cost-of-living index will hurt workers  


Opening a new front against Social Security, Senators Daniel Moynihan of New York and William Roth of Delaware unveiled a report by a Congress-appointed commission claiming the government has been overstating inflation by 1.1 percent for at least a decade. The commission called on the Republican-majority Congress and the Democratic administration of President William Clinton to take steps to revise the Consumer Price Index (CPI). The index is used to calculate cost-of-living adjustments for many union contracts as well as for entitlements such as Social Security.

Arbitrarily lowering the CPI by one percentage point, or rigging how cost-of-living increases for social entitlements are measured through other alternatives floated by capitalist politicians, will hurt workers, most of whom depend on Social Security as their only income upon retirement.

The White House began preparations to implement such proposals days after Clinton was re-elected to a second term, on the pretext of balancing the federal budget and "saving" programs such as Social Security and Medicare from supposed imminent bankruptcy by cutting them.

The five-member commission charged with issuing the report on the CPI is headed by Michael Boskin, an economics professor at Stanford University and former chief of the White House Council of Economic Affairs under President George Bush. Other members of the panel include Robert Gordon of Northwestern University, Zvi Grilliches and Dale Jorgenson of Harvard, and Ellen Durberger, an economist for International Business Machines Corp. (IBM). Clinton gave his blessing to this bipartisan panel when it was appointed two years ago.

The commission presented its "findings" and recommendations at a December 4 hearing sponsored by the Senate Finance Committee, chaired by Republican Roth. Moynihan is the ranking Democrat on the committee. Moynihan explains coming assault
A few days earlier, Moynihan explained what was coming and offered his public endorsement for a version of the Boskin proposals.

The Democratic Senator appeared on the December 1 NBC television show "Meet the Press," along with Senate Republican whip Donald Nickles.

"The first decision we're going to make is not about Medicare or any other thing," Moynihan said. "It's about revenue. On this Wednesday, a bipartisan commission appointed by the Finance Committee two years ago is going to come... forward with a proposal on changing our cost-of- living calculations."

Moynihan pointed to a Bureau of Labor Statistics pamphlet he said explains that the CPI is mistakenly called a cost-of-living index.

"A true cost-of-living index, which we [use to] measure so many government programs, would give us savings [in] outlays and revenues of about $1 trillion in 10 years," Moynihan stated. "We need to have some maintenance work on a government statistic that we have known for 30 years isn't getting things right.... This began as an index for wages in shipyards in World War I. It doesn't work today."

The program host pointed out that the alleged $1 trillion in savings would come from "smaller cost-of- living increases to Social Security recipients... and higher taxes."

Moynihan responded, "It permeates our finances right now. If you correct [the CPI], if you just get it right - you're not trying to take anything away from people, just get the right number - the results would be immense."

"But, Senator, you say it doesn't hurt anybody," David Broder of the Washington Post, who joined in the questioning, chimed in. "That trillion dollars comes from people getting lower benefits and other people paying higher taxes."

Moynihan didn't miss a beat. "From the people getting the correct increase in their benefits," he asserted, drawing compliments from Senator Nickles. "I think that's a very small price to pay for a secure Social Security system into the next century and beyond," the Democratic senator declared. Declining pensions
The Consumer Price Index is compiled by the Labor Department Bureau of Labor Statistics (BLS). It measures inflation by tracking the prices of a "market basket" of products reflecting typical purchases.

Cost-of-living adjustments on Social Security, veterans' benefits, and pensions for federal employees are pegged to the CPI. Social Security payments for next year, for example, are calculated on the basis of a 2.9 percent increase in the cost of living. If the government lowers this adjustment by 1.1 percent, workers would lose about $8 from the average monthly Social Security payment, now at $724. According to the New York Times, if the decrease was retroactive those who retired at the start of 1985 would now be receiving nearly $89 less per month.

Such a change in the price index would also adversely effect the pay of workers under union contracts that have wage increases directly tied to the CPI, although there are fewer of those than in the past. Many companies have eliminated cost-of-living adjustments from contracts as part of the bosses' offensive against labor over the last two decades.

According to an article in the November 25 Washington Post, less than 40 percent of the 33 million U.S. citizens age 65 and over collect a pension other than Social Security. The average recipient gets less than $10,000 per year. And on any given day today, only half of all workers are in jobs in which they earn credits toward pension plans. In most of the new jobs created, pension coverage is sparse. And many companies are increasingly hiring contract workers or temporary employees without health insurance or pension benefits. A potential social explosion
The last time Washington attempted to touch Social Security benefits was in 1983, under a similar scare that the Social Security trust fund was about to plunge in the red. A bipartisan congressional panel headed by now Federal Reserve chairman Alan Greenspan recommended introducing taxes on Social Security payments and raising Social Security deductions from workers' paychecks. A Democratic-majority Congress approved the Greenspan proposals and Republican president Ronald Reagan later signed them into law. Moynihan was at the center of reaching the bipartisan deal back then as well.

Top administration officials and other politicians admit that the proposed reduction in the CPI could be a potentially explosive step. Treasury Secretary Robert Rubin told the Washington Post that administration officials would have to study the Boskin commission report and "see how people react to it."

"If you perceive Medicare as red-hot, this issue is white-hot" politically, said Richard May, staff director for the House budget committee. To consummate a bipartisan deal that includes the CPI change, he said, "Both sides would have to sign in blood that they wouldn't demagogue the issue." May said that Republicans were earlier pummeled by Democrats during the election campaign for proposing drastic cuts in Medicare, though Clinton himself had argued for cutting $124 billion.

"I'd like for the President to lead" on this one, Senate majority leader Trent Lott said December 3.

The U.S. rulers' inability to reverse declining profit rates through "downsizing" and the cutbacks in social programs enacted so far, such as welfare, is fueling a broad ideological campaign for a more frontal assault on labor, despite the potential uproar the Boskin proposals may generate.

The Wall Street Journal editors gloated that the proposed "correction" of the CPI not only makes the closing of the budget deficit possible by cutting Social Security, but also proves that figures showing declining real wages for two decades are false!

"The Boskin data don't show a worker dramatically losing ground," asserted the December 4 Journal editorial. "They conclude that the same worker has actually realized a 13 percent improvement in his lot, as measured by hourly earnings, since the early 1970s."

The Boskin justifications for rigging the CPI are now widely repeated in the editorial space of the capitalist press. The BLS "calculation takes inadequate account of the fact that consumers offset some of the impact of higher prices by switching to lower-priced goods," said an editorial in the December 5 New York Times.

On top of that, when the quality of a commodity rises no one can speak of a real price increase, claim the editors of the liberal daily. "A computer that does twice the work for twice the price does not truly add to the cost of living."

Other spokespeople for big business are explaining how some of the schemes to cut Social Security by revising the CPI could divide employed workers from those who are retired. The December 2 Christian Science Monitor, for example, interviewed David Wyss, an economist with DRI/McGraw-Hill in Lexington, Massachusetts. Wyss said one of the Boskin commission proposals is to establish a "cost- of-living index," in addition to the CPI.

"This would `not mess up' private contracts," the article said. "Union workers, for example, would still get raises outlined in their contracts according to the CPI." At the same time the government would use the new index to lower cost-of-living adjustments for social entitlements.

The December 3 Wall Street Journal explained that many major corporations are spending considerable sums on public forums and conferences to push the idea of privatizing Social Security and replacing it with millions of individual retirement accounts. Gradual steps toward wholesale privatization include proposals to convince workers to take part of their Social Security taxes and invest them in the stock market.

Attacks on Medicare and Medicaid, which provide health- care coverage for the elderly and disabled, and low income families, respectively, are being justified on the same grounds.

During the December 1 "Meet the Press" appearance, Moynihan said that the Medicare fund is not the only one in trouble. "The Medicaid fund is not going broke. It is broke. It has been in a negative cash flow for four years."

At the beginning of the TV program, Moynihan also dismissed the possibility that the Clinton administration and Congress may enact measures to roll back some of the cutbacks enacted with the Welfare Reform Act.

Last summer, the Democratic Senator was one of the handful to vote against that bill. He called it "the first step in dismantling the social contract that has been in place in the United States since at least the 1930s. Do not doubt that Social Security itself, which is to say insured retirement benefits, will be next. [The 1935 act pledged to] care for the elderly, the unemployed, the children. Drop the latter; watch the others fall."  
Front page (for this issue) | Home | Text-version home