[Boston-editorial] Column on Wall Street CEOs and Social Security Privatization

[Betsy Leondar-Wright]

Hello,
Please let me know if you¹d be interested in running this column.
Thanks,
Betsy Leondar-Wright, Communications Director, United for a Fair Economy
617-423-2148 x113

Your Risk, Their Gain
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.

The President 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 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Security tax withdrawn from their paychecks until Dec. 31, according to the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 ³Joe² and ³Juanita² taxpayers is 12.4 percent (6.2%
contributed directly by the employee, and 6.2% 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 ³Joe² 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 earned an average of over $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 ³taxpayers for a day.² 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 4 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% 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 at responsiblewealth.org) is a researcher at United for
a Fair Economy and co-author of the new report, ³Taxpayers for a Day: Wall
Street CEOs Have Most to Gain, Least to Risk, in Social Security
Privatization Schemes.² The full report is available at
http://www.faireconomy.org/WallStreetCEOS.