Progress Report: Worst. Privatization Plan. Ever.

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Tue, 21 Jun 2005 12:51:51 -0700 (PDT)

Progress Report: Worst. Privatization Plan. Ever.

 

 

The Progress Report

by Judd Legum, Faiz Shakir, Nico Pitney, Mipe Okunseinde and Christy

Harvey

www.progressreport.org

6/21/2005

 

For news and updates throughout the day, check out our blog at

ThinkProgress.org.

 

SOCIAL SECURITY

 

Worst. Privatization Plan. Ever.

 

Social Security privatizers have spent months mocking the idea of a

Social Security surplus. Now they are banking on it to revive their

sinking political prospects. Sens. Rick Santorum (R-PA), Lindsey

Graham (R-SC) and Jim DeMint (R-SC) will introduce a bill that would

divert surplus Social Security funds into private accounts. It's their

worst idea yet. The new privatization plan would require hefty tax

increases, massive program cuts or tacking on billions to the federal

deficit. Even so, it does nothing to improve the solvency of Social

Security -- in fact, it makes things worse. But the bill's sponsors

say they'll " address those concerns later. " First, they want to

" create momentum and enthusiasm for Bush's proposed private accounts. "

The White House said the new idea " is worth taking a look at. " Wake us

up when the party's over.

 

NEW PRIVATIZATION PLAN WOULD EXPLODE FEDERAL DEFICIT: The Wall Street

Journal claims that the proposal (which it calls " political jujitsu " )

would " create no new debt for the government. " That's not true. Right

now, money that is collected from Social Security payroll taxes that

is not needed to pay current Social Security benefits is used to pay

for other government programs. Absent an accompanying package of tax

hikes or program cuts (don't hold your breath) the new privatization

plan would divert all of those funds to private accounts and make our

current deficit problems much worse. For example, using the Social

Security surplus to help make ends meet, the 2006 budget deficit is

expected to be around $400 billion. The Social Security surplus is

expected to be $170 billion (see table S-10). So if this new

privatization plan were to be enacted, next year's deficit would

skyrocket to $570 billion. Things get worse over time. In 2009 the new

plan would add an additional $230 billion to the federal deficit.

 

THE SANTORUM FLIP-FLOP: Santorum's involvement in the budget busting

plan is especially puzzling. In 1999, Santorum introduced a bill that

would have required " all Social Security surpluses ... [to] be

dedicated to reducing the publicly-held Federal debt. " Santorum said,

" when one considers that the system is already in fiscal jeopardy,

spending this money only aggravates the problem. " Now Santorum has a

proposal that would spend the money and aggravate the problem.

 

NEW PRIVATIZATION PLAN WOULD WEAKEN TRADITIONAL SOCIAL SECURITY: The

new privatization plan would also weaken traditional Social Security

by raiding the Social Security trust fund. Under the current system,

when surplus Social Security funds are spent on other programs, the

government creates a binding obligation to repay the money at a later

date. Because of this trust fund, the government will be able to pay

Social Security benefits at current levels until at least 2052. The

new privatization plan would eliminate all future contributions to the

trust fund, undermining the program's long-term solvency. If the

program becomes insolvent, the government will be forced to make deep

cuts in guaranteed benefits. Of course, that's what all these

privatization plans are really about.

 

THE REAL GOAL -- PERMANENT PRIVATE ACCOUNT CARVE-OUTS: The use of the

Social Security surplus to fund private accounts is just a gimmick.

The real goal remains the same: finding a way to divert payroll taxes

from a guaranteed benefit to private accounts. DeMint explicitly told

the WSJ that if his plan was enacted into law, " Congress would be

compelled to find a way ... to ensure their continuation after payroll

tax surpluses dried up. " That means diverting money from Social

Security payroll taxes, further eroding the guaranteed benefit.

 

CORRUPTION

 

Cunningscam Continues

 

If there was ever a time to get the House Ethics Committee up and

running again, now is that time. In addition to the multiple ethically

questionable trip-ups of House Majority Leader Tom DeLay, there's a

new story unfolding involving a " Duke, " a defense contractor and a

highly unusual million-dollar real estate transaction. While the FBI

has already " opened an inquiry " into the conduct of Rep. Randy " Duke "

Cunningham (R-CA), Rep. Doc Hastings (R-WA) and his stagnant House

Ethics Committee can do nothing.

 

THE STORY: In late 2003, when Cunningham decided to sell his Del Mar,

CA, home, he didn't rely on the market. Instead, " Cunningham -- who

sits on the defense appropriations subcommittee -- turned to a defense

contractor. " After purchasing the house, contractor Mitchell Wade of

MZM Inc. flipped it back on the market " where it languished for 261

days before selling for $700,000 less than the original price. " During

this period, Cunningham used his influential position to " [support]

the contractor's efforts to get tens of millions of dollars in

contracts from the Pentagon. " Just how successful were Cunningham's

efforts? By the next year, Wade's little-known MZM had tripled its

revenue, nearly quadrupled its staff, and suddenly landed itself on a

list of the top 100 federal contractors for 2005. Neither Wade nor his

company was ever listed as the buyer of Cunningham's house. " Instead,

the [property] records state that Cunningham sold the house to 1523

New Hampshire Avenue LLC. Nevada state business records show that Wade

owns that company, too. It is the address of his Washington, D.C.,

office. "

 

MEET ELIZABETH TODD, THE WORLD'S WORST REALTOR?: In defending the

house deal that netted Cunningham hundreds of thousands of dollars,

the congressman's office stated the defense contractor had " received

comparables from an independent source establishing the value of the

home. " The realtor " sent Wade the 'comps' and set the asking price for

Cunningham. Based solely on those comps, Wade accepted the asking

price. " In fact, the " comps " weren't that independent. Wade hired this

same realtor for his almost immediate resale of Cunningham's home. And

Cunningham in turn hired her for the $2.55 million " house that he

acquired immediately after selling the Del Mar house, " which would

have fetched her a pretty hefty commission. This ever so popular

realtor is Elizabeth and she certainly is not new to the

congressman. In fact, Todd and two family members " have made 18

separate contributions totaling $11,500 to Cunningham's congressional

campaign committee since 1997. "

 

DUKE'S HOME AWAY FROM HOME: With his successful real estate

experiences in his home state of California, one would assume

Cunningham would have the same luck looking for a home back here in

Washington. Apparently not. While working here in the nation's

capitol, Rep. Randy " Duke " Cunningham stays on a yacht docked at a

Washington yacht club instead. The boat is " docked at Cunningham's

slip. " The boat " bears the name 'Duke Stir.' " The boat is owned by

defense contractor Wade.

 

WRINGING OUT DONATIONS TO THE DUKE: Dubious house sales aren't the

only way Cunningham has gotten money out of Wade and MZM Inc. During

the 2002 and 2004 election cycles, MZM's PAC doled out $17,000 to

Cunningham. And though Wade has personally given thousands of dollars

to Cunningham since 2001, he didn't stop there. Three former employees

of the defense contractor have given separate accounts of how " its

founder, Mitchell Wade, routinely forced employees to give political

donations. " One senior former employee reveals, " By the spring of '02,

Mitch was twisting employees' arms to donate to his MZM PAC. We were

called in and told basically either donate to the MZM PAC or we would

be fired. " The amounts to be donated were " based on their level of

seniority in the company. " In one instance, employees were " rounded up

.... and told to write a check with the political recipient standing

by. " If these charges are true, Wade " can be subject to criminal

prosecution. "

 

THE FAMILY AND THE FOUNDATION: In 2004, Cunningham served as vice

chairman on a subcommittee of the House Appropriations Committee. In

October of that year, the subcommittee " authorized a $100,000 grant to

The Sure Foundation. " Unsurprisingly, the foundation has ties back to

Wade and Cunningham. " Wade is the treasurer of the foundation. Wade's

wife ... is president emeritus of the foundation. Cunningham's wife

.... and one of his daughters ... sit on the advisory council for the

foundation. " There are only two other people on the foundation's

advisory council. Cunningham himself " is listed on the website of the

Sure Foundation ... as a member of an 'honorary committee.' "

 

DUKE IN MORE HOT WATER: Rep. Cunningham has defended himself

vehemently by stating, " My whole life I've lived aboveboard. I've

never even smoked a marijuana cigarette. I don't cheat.... The last

thing I would do is get involved in something that, you know, is

wrong. " For someone who claims such innocence, he sure seems to be

finding himself in hot water. Yesterday, Cunningham had " the clerk of

the House of Representatives announce -- without details -- that his

office has been subpoenaed. " It was later revealed that the subpoena

" had nothing to do with the federal investigation into the sale of

Cunningham's San Diego home to a defense industry executive. "

 

Under the Radar

 

INTERNATIONAL AFFAIRS -- BOLTON NOMINATION ON THE ROPES: For the

second time in a month, the nomination of John Bolton to be the next

U.S. ambassador to the U.N. was stalled. Eight senators, including

John Thune (R-SD), Norm Coleman (R-MN), and Conrad Burns (R-MT),

abstained from the vote. With the White House maintaining its

resistance to disclosing information relating to Bolton's tenure at

the State Department, Sen. Pat Roberts (R-KS) was forced to concede,

" At this juncture, I think it's a pretty tough climb. " The next move

may be for President Bush to turn his back on his call for the Senate

to give Bolton an " up-or-down vote " and instead appoint him through a

recess appointment, thereby temporarily bypassing the need for an

up-or-down vote. A recess appointment may be " Bolton's only hope, " but

Roberts has said such a move " would weaken not only Mr. Bolton but

also the United States " because the international community would see

the new ambassador as " lacking bipartisan support. "

 

VALUES -- RELIGIOUS ATTACKS ON HOUSE FLOOR: Responding to reports that

the Air Force Academy has become a hotbed of religious proselytizing

and harrassment toward Jewish and non-evangelical Christian students,

Rep. David Obey (D-WI) yesterday proposed an amendment that called on

the academy to investigate and prevent such behavior. Controversial?

Only if you're Rep. John Hostettler (R-IN), who prefaced his remarks

on the amendment by saying, " The long war on Christianity today

continues on the floor of the House of Representatives. " " Like a moth

to a flame, " Hostettler said later, Obey and his colleagues " can't

help themselves when it comes to denigrating and demonizing

Christians. " (Note to Hostettler: It was a Lutheran Air Force chaplain

who first blew the whistle on the academy.) Obey stood his ground, and

ultimately forced Hostettler to retract his comments.

 

MEDIA -- OBJECTIVELY UNOBJECTIVE: " A researcher retained secretly by

the chairman of the Corporation for Public Broadcasting (CPB), to

monitor the 'Now' program with Bill Moyers for political objectivity

last year, worked for 20 years at a journalism center founded by the

American Conservative Union and a conservative columnist, " the New

York Times reports. CPB Chairman Ken Tomlinson's secret researchers

are just one of the brewing scandals now being investigated by the

corporation's inspector general. Yesterday, Sen. Frank Lautenberg

(D-NJ) called on Tomlinson to resign: " Your conduct has undermined the

C.P.B. and its mission of quality public broadcasting free of

political interference, " Lautenberg wrote.

 

HEALTH CARE -- STUDY FINDS CARE BECOMING UNAFFORDABLE FOR PRIVATELY

INSURED: Bloomberg reports, " Americans with private health insurance

got no reprieve from cost increases last year as medical expenses for

each person rose 8.2 percent, roughly the same rate of increase as

2003, according to a new study. " The study, released by the Center for

Studying Health System Change, found that prescription-drug spending

accounted for 21 percent of the overall increase in health-care

spending. Paul Ginsburg, an economist at the center, said, " If

health-care spending continues to grow at a significantly faster rate

than workers' incomes, and there's every sign that it will, health

insurance will become unaffordable to more and more people. "

 

PRIVACY -- PROMISES TO CONGRESS? WE HAVE TO KEEP THOSE?: " A federal

agency collected extensive personal information about airline

passengers although Congress told it not to and it said it wouldn't,

according to documents obtained Monday, " the Associated Press reports.

Apparently, the Transportation Security Administration hired a

contractor who " used three data brokers to collect detailed

information about U.S. citizens who flew on commercial airlines in

June 2004 in order to test a terrorist screening program called Secure

Flight. " The program has been criticized for " secretly obtaining

personal information about airline passengers, not doing enough to

protect it and then misleading the public about its role in acquiring

the data. "

 

GOOD NEWS

 

Sen. George Voinovich (R-OH) held true to his principles and voted

against cloture on the Bolton nomination. Reiterating that Bolton is

" not the right man for the job, " Voinvoich explained his vote by

saying, " I am concerned that John Bolton's ineffectiveness may

negatively impact our nation's ability to meet the ongoing challenges

that Iran and North Korea pose to the United States and the U.N. "

 

DON'T MISS

 

TALKING POINTS: Senate Privatization Plan DOA.

 

TORTURE: Abuse at Guantanamo is not befitting American values.

 

BOOKS: MediaMatters CEO David Brock writes Penguin publishers about

their new factually challenged screed, " The Truth About Hillary. "

 

MEDIA: Blogs have become the news cycle's appeals court, Jay Rosen argues.

 

IRAQ: Bush's poll numbers on Iraq are not making progress.

 

DAILY GRILL

 

" We will make no distinction between the terrorists who committed

these acts, and those who harbor them. "

-- President Bush, 9/11/01

 

VERSUS

 

" When you go to the question of dealing with sanctuaries in sovereign

states, you're dealing with a problem of our sense of international

obligation, fair play. "

-- CIA Director Porter Goss, 6/19/05, on searching for Osama bin Laden

in Pakistan

 

(Thanks Atrios.)

 

DAILY OUTRAGE

 

Sen. Lamar Alexander (R-TN), in explaining his opposition to the

expansion of incentives for the wind energy industry, said

wind-powered turbines are " gigantic public nuisances. " Alexander

fought a proposal to require utilities to produce more power from wind

and other renewable energy resources.

 

© Copyright 2005 by American Progress Action Fund. All rights reserved.