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For years we have been bombarded by an effective Wall Street advertising campaign designed to make us believe that Social Security is near-bankrupt. The solution, we have been repeatedly told, is to privatize Social Security; let the American citizenry invest part of its Social Security funds in the stock market.

According to Chris Hartman’s Four Lies About Social Security, this advertising campaign is “built on misinformation, distortion, and outright lies.”

How could Wall Street possibly benefit from the privatization of Social Security? The answer is simple if you follow the money. The Social Security trust fund is currently hovering at about the US$1 trillion mark, what Hartman calls “probably the largest single stash of dough ever amassed in human history.” If Social Security is privatized, Wall Street gets to carve up at least a portion of that trust fund into approximately 300 million individual accounts for every American citizen. Each of those accounts would generate management fees on the order of what Hartman describes as “a never-ending Niagara Falls of fees, cascading forever into the coffers of Wall Street.”

Social Security gets a bad rap, but it’s managed to reduce the elderly poverty rate by paying a minimal, guaranteed benefit that can’t be lost, wasted, or taken away. That, in itself, is what drives the Wall Street greedheads, their conservative political lackeys, and inattentive libertarians nuts.

In order to get access to that big pot of money, Wall Street has to convince us that Social Security is a risk. To do that, they’ve embarked on this nefarious advertising campaign described by Hartman and synthesized into Four Big Lies:

1. Baby boomers will bankrupt Social Security. Congress, while arguably minimally competent on a good day, hasn’t exactly been asleep at the wheel. The effective Social Security tax rate has been raised, resulting in our collectively putting by a little more to meet this need for the past 20 years or so. Actually, the tax rate hasn’t been raised at all; we just pay the tax on more of our earnings now than we have in the past. Today we’re adding about US$170 billion to the trust fund each year. This nest egg won’t even begin being drawn down until 2016, the year Wall Street and the libertarians claim will be the year of our financial demise.
2. The Social Security trust fund is worthless. While it’s true that the US$1 trillion trust fund is not in cash, here’s a newsflash: the trust fund contains U.S. government bonds. The same treasury bonds that are traded on Wall Street every day. Should the government fail to honor them, a hell of a lot more than Social Security will be at risk.
3. The stock market is a better deal. The last two years speak for themselves. Social Security may only return about 3% but it’s a guaranteed 3% percent. As much as we want to believe the contrary, there are no guarantees in the stock market. Corporate profits are expected to be significantly lower than they’ve been in the past, not the least because of the outrageous compensation disparities between executives and those who actually do the work. At least one economist, Dean Baker of the Center for Economic and Policy Research, estimates future stock market returns at about 3.6% per year. Wall Street’s account management fees will almost certainly absorb at least the .6% advantage and there’s always that pesky bit about guaranteed return.
4. Tax cuts raid Social Security. The bonds that make up the Social Security trust fund cannot be “raided.” They can’t even be converted to cash and can be used only for Social Security benefits.

Social Security faces a potential long-term funding shortfall. But this is a) potential and b) entirely fixable. Given a worst case scenario, Social Security taxes could be levied on all earned income (instead of the first US$84,900 as it is now) or the actual rate could be raised a small amount. As a self-employed professional who pays both sides of his Social Security taxes, I’d much prefer the former, but I could easily live with the latter.