The June 2005 Edition of Street Spirit

A publication of the American Friends Service Committee

 
 

National AFSC AFSC Economic Justice BOSS Website

 

 

In this issue:

Court Upholds Legal Rights of Homeless People

Hunger Rises, Food Stamps Cut

National Hunger Survey

Union Busting in El Salvador

CEO Pay Rises, Worker Pay Shrinks

CEOs Scheme to Privatize Social Security

Dee's Story: The Stigma of Being Homeless

Bush's Chronic Homeless Plan

Pepperspray and Torture

How Earth Day Was Co-opted

St. Mary's Center

Life Stories of Homeless Seniors

Hodges Jones

Jose Querdo

Jeannette Hundley

James Jermany

Ken Minor

Lynn Hoberg

Social Justice in the East Bay

100 Teachings of Gandhi

June Poetry of the Streets

Students Poetry


ARCHIVES

May 2005

February 2005

 

 

 

 


 

Street Spirit is published by American Friends Service Committee.

All works are copyrighted by the authors.

The views expressed in Street Spirit are those of the individual authors alone, and not necessarily that of the American Friends Service Committee.

CEOs Want to Privatize Social Security at Your Expense

The CEOs of Wall Street firms won't taste the bitter medicine they're prescribing for others. They will make billions for their companies and millions for themselves.

by Scott Klinger

Would you be upset if someone spent millions of dollars to put your future retirement funds into a casino, while taking no risks with their own future? Say hello to the Wall Street CEOs whose companies are aggressively lobbying for Social Security privatization. Because of their bloated compensation packages, these CEOs pay Social Security taxes only a few days a year.

President Bush has leaned on his Wall Street patrons to help with his faltering Social Security crusade. They have stepped forward, albeit blushing from embarrassment at their conflict of interest. These firms and their CEOs will handsomely profit from administering private accounts and collect billions of dollars in management fees.


Meet Kennedy Thompson, CEO of Wachovia Corporation, one of the Wall Street financial firms that have been most active in efforts to privatize Social Security. The company supports the pro-privatization Alliance for Worker Retirement Security and Citizens for Sound Economy. Thompson is on the board of the Securities Industry Association, Wall Street's principal lobbying group, which has advocated for Social Security privatization for over a decade.


As the country's third largest retail brokerage firm, Wachovia is well positioned to cash in on the establishment of private accounts, such as those advocated by President Bush. In 2004, Wachovia CEO Thompson hauled in $13.3 million in executive compensation. He was essentially done paying his Social Security taxes for the year at the end of January 2.


How is this possible? In 2004, Social Security tax was paid only on the first $87,900 of earnings. In 2005, the earnings cap was raised to $90,000.


Over 94 percent of workers earn less than the earnings cap and have Social Security tax withdrawn from their paychecks until December 31, according to the Economic Policy Institute. In other words, they pay Social Security taxes on 100 percent of their wage income. The effective rate of Social Security taxes on these "Joe" and "Juanita" taxpayers is 12.4 percent (6.2 percent contributed directly by the employee, and 6.2 percent by the employer).
But not CEOs like Kenneth Thompson. His effective rate for Social Security taxes was a microscopic 0.08 percent in 2004.


So the average Joe taxpayer pays an elephant-sized rate of Social Security taxes that is 152 times that of the flea-sized rate paid by CEO Thompson. If Thompson paid the same effective rate as Joe taxpayer, he would have paid $1,654,644 in Social Security taxes, instead of $10,900.


In 2004, the CEOs of the 26 leading Wall Street firms advocating for Social Security privatization earned an average of more than $17.7 million. Because of the earnings cap, they were done paying their Social Security taxes an average of four days into the new year.


Seven of the CEOs were "taxpayers for a day." Their salaries were so gargantuan, they exceeded the $87,900 earnings cap in eight hours or less. These include the CEOs of Bear Stearns, Charles Schwab, Goldman Sachs, Lehman Brothers, and Morgan Stanley.


The CEO of Wells Fargo, Richard M. Kovacevich, was the highest paid among the financial services industry, collecting $52.1 million in 2004. He was done paying into Social Security after four hours, or during the pre-game show for the Rose Bowl on New Year's Day.


These CEOs are not men who will be depending on their Social Security check for their basic survival in their golden years. Yet they are advocating changes in the public pension program that could jeopardize the security of working Americans.


They won't taste the bitter medicine that they are prescribing for others. But they will make billions for their companies and millions for themselves.


The Social Security system may face financial shortfalls after 2051. Privatizing Social Security will only worsen the problem; but there is one elegant fix that would help.


We should eliminate the earnings cap so that CEOs like Kenneth Thompson pay the same effective rate as Joe and Juanita taxpayer. According to the Economic Policy Institute, this fix would eliminate 90 percent of the funding deficit projected by the Social Security Administration.


If Wall Street CEOs pay into the system all year long, perhaps they'll have a greater stake in ensuring that we have a rock-solid retirement system that works for everyone, not just for their companies' profits.

Scott Klinger (sklinger@responsiblewealth.org) is a researcher at United for a Fair Economy and co-author of the new report, "Taxpayers for a Day: Wall Street CEOs Have Most to Gain, Least to Risk, in Social Security Privatization Schemes."


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