Pensions at Risk: Attack on the Working Class

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The pensions of American workers face an unrelenting attack as part of the ruling class’ austerity program aimed at lowering the standard of living in order to make the working class bear the brunt of the deepening global economic crisis and to finance US imperialism’s military interventions throughout the world. In Internationalism No.134, we demonstrated how the bourgeoisie has been siphoning off vast financial surpluses from the social security fund over the years to finance its imperialist operations (“Report on the National Situation: Social Security Reform – A Frontal Attack on the Working Class” Internationalism 134). We pointed out that in regard to its proposed social security “reforms,” “The real goal of the Bush administration is to avoid paying back those $6 trillion that will have been pilfered from the trust fund by 2028. In 1983, the American ruling class used the ruse of an impending social security crisis to raise the taxes on the working class and used that money not to pay pensions to retirees or to set it aside to pay the pensions of future retirees but to fund its aggressive imperialist policies. Now it wants to complete this massive social swindle by maneuvering to avoid repaying $6 trillion dollars confiscated from the working class back into the social security trust fund.”

Facing tremendous skepticism within the working class and reluctance even from elements within the bourgeoisie, who fear the economic impact if the government refuses to repay the bonds issued to the social security trust fund, the Bush administration continues to readjust its social security reform proposal. The most recent version of this plan maintains the call for a partial privatization of social security, with part of pension money deposited in privately administered stock market investment accounts. But its most significant feature is to propose changing social security from a pension fund that is supposed to support all workers’ retirement, to a modified welfare fund, aimed at using the contributions paid by more well paid workers to finance the retirement of lower income workers. According to this plan, low income workers would receive 100% of their current benefits, but workers earning higher wages would have changes phased in that would lower their benefits by up to 65% (in the previous proposal, the maximum cut was only 45%) in order to fund benefits for the poorer workers.

The argumentation supporting this proposal emphasizes that higher paid workers don’t “:need” social security to support their retirements, because they receive money from their private pension funds usually managed through their employers. Never mind that workers have fought for these private pensions as part of the benefit package that comprises part of their wages, and have also put part of their savings into these funds, precisely because social security benefits are only sufficient to maintain a bare subsistence standard of living in retirement. Recent developments demonstrate the hypocrisy of this argument. The seriousness of the economic crisis has put these private pensions in jeopardy. For example, as part of its court-supervised plan to recover from bankruptcy, United Airlines was granted permission to abandon its seriously underfunded pension plan, which will now be taken over by the government sponsored Pension Benefit Guarantee Corporation (PBGC), which is responsible for bailing out failed private pension funds. United Airlines employees will be lucky to receive 70% of the benefits they were entitled to. Other major airlines, also facing economic difficulties, are expected to follow United Airlines lead. Major companies in other industries may also follow suit. So serious is the failure rate of pension funds in the US, the PBGC is currently operating with a $23 billion dollar deficit. An estimated 50% of the top 100 private pension funds in the US are currently underfunded, and at risk for collapse.

So, the so-called “higher paid” workers, who are supposedly so comfortable, face up to 65% cuts in their federal social security pension benefits at the same time that their private company-based pension funds increasingly face economic disaster which will mean a loss or severe cut in benefits from that quarter as well. This double-whammy that the government is trying to ram down the throats of the working class is fraught with tremendous political risk for the bourgeoisie, as there is a risk that workers will respond to this frontal assault on their standard of living. In California, Gov. Arnold Schwarzenegger was forced in April to abandon his proposal to privatize state employee pensions because of near universal opposition from public sector workers. Despite making social security reform his number one domestic issue, Bush has made absolutely no headway, despite his so-called “mandate” at the polls last November. The inability of American capitalism to pay its wage bill, including pensions earned working class, in large part in order to pay for its imperialist military incursions, exposes both the economic bankruptcy of global capitalism and the fact that it offers humanity a future of death and destruction.

J. Grevin, 25/6/05.