Employment conditions in the United States continue to worsen. And the growing number of jobless whose unemployment benefits have or are about to run out is forcing many workers to apply for early retirement or disability Social Security benefits.
The Labor Department reported Oct. 2 that U.S. job losses accelerated last month with the unemployment rate climbing to 9.8 percent. Almost one out of 10 U.S. workers is out of a job, according to the minimal official statistics.
The official rate would have been substantially higher if the government hadn’t deemed the “labor force”—that is, all those counted by the Labor Department as employed or actively seeking employment—to have fallen by 571,000. (Yahoo News, Oct 2) In other words, more than a half million unemployed workers gave up looking for work last month, according to the department.
Actual payrolls dropped by 263,000 in September “exceeding the median forecast … with losses extending from cash-strapped state and local governments to retailers to builders.” (Bloomberg News, Oct. 2)
The employment report also showed that 51,000 factory workers lost their jobs in September after the loss of 66,000 factory jobs the prior month. And the average workweek fell to 33 hours, matching a record low.
The “long-term unemployed”—workers who have been unemployed for 27 weeks or more—rose by 450,000, to 5.4 million. Last month, 36 percent of the unemployed had been out of work for at least six months. And job prospects appear dim: Job seekers outnumber job openings by a ratio of 6 to 1. (Yahoo News, Oct. 2)
September’s losses bring total jobs lost since the current slump began in December 2007 to 7.2 million, the biggest decline since the Great Depression.
Applications for Social Security benefits rise sharply
According to an Oct. 1 USA Today article, the number of retired workers who began collecting Social Security benefits jumped by a record 19 percent in the 2009 fiscal year that ended Sept. 30.
“There are just not enough jobs for older people,” Richard Johnson, senior fellow at the Urban Institute, states. “They have no choice but to go on Social Security.”
The article also reports: “The number of disabled workers receiving first-time benefits also soared to nearly 1 million, an increase of 100,000 over the previous year, according to Social Security Administration records.”
“The economy plays a big part,” says Dan Allsup, spokesman for Allsup Inc., which handles disability claims. “Every time there is a recession, it spikes.
“We have the combination of more people filing for early retirement and disability benefits at the same time that we have a reduction in the size of the workforce,” said Stephen Goss, Social Security’s chief actuary.
The figures are affected both by the current deep recession and by “baby boomers” who began reaching the early retirement age of 62 in 2008.
Impact on Social Security finances
The combination of fewer workers and their employers paying into Social Security and more people drawing benefits out is reducing the usual surplus of revenue from payroll taxes paid in over benefits paid out. Social Security trustees project that expenses will exceed revenue beginning in 2016, one year earlier than their previous forecast. (Bloomberg News, Oct. 2)
The cumulative total of surpluses going back to 1937, when Social Security taxes were first levied, added up to over $2.2 trillion by the end of 2008.This is the amount supposedly available for future payouts from the “Old-Age and Survivors Insurance” trust fund. It doesn’t count additional hundreds of billions in the separate “Disability Insurance” and Medicare trust funds.
However, none of that money actually exists. It has all gone to help finance the ballooning federal deficits, mostly the result of war spending. This criminal use of a part of workers’ deferred wages, which is what payroll taxes really represent, to pay for imperialist wars and preparations for more wars is made possible by “investing” the ongoing Social Security surplus in special non-marketable securities issued by the U.S. Treasury.
These IOUs from a government whose finances are more and more shaky are the “assets” carried on the books of the various Social Security and Medicare trust funds.
Expect a new campaign to ‘save Social Security’
Since the Social Security surplus is critical for the continued financing of imperialist war, and for other government outlays, we can most likely expect a new scare-mongering campaign to “save Social Security” well before 2016.
The past year’s bailouts of the big banks make even more likely that such a campaign will be launched. The bailouts involved—in addition to massive loans and loan guarantees—the Federal Reserve System, the U.S. central bank, purchasing huge quantities of mortgage-backed securities and other “toxic assets” from banks and mortgage lenders.
The Federal Reserve also allocated some $300 billion to purchase U.S. Treasury bonds to prop up the bond market and keep long-term interest rates low.
Considering that the Federal Reserve System has no taxing authority and hasn’t issued bonds of its own, where did it get the many hundreds of billions of dollars needed for these gargantuan loans and purchases? It simply ran them off its electronic printing press—that is, it went on a money-printing spree.
The result is that bank reserves have exploded at an unprecedented rate since the bailouts began. Once an economic recovery gets underway, these reserves can be the basis for an explosion of credit that if not quickly curtailed could result in an inflationary crisis even worse than the one that occurred in the 1970s, when the dollar lost more than 90 percent of its value.
One way used in the past to head off such a dire outcome is for the “Fed” to raise interest rates sharply.
This is exactly what Paul Volcker, Fed chairman under Democratic President Jimmy Carter, did in 1979 when faced with a collapsing dollar. The result was the famous “Volcker shock” of 1979-80, which saved the dollar but at the cost of the deep slump of 1980-82. Volcker is currently a senior advisor to President Obama.
Another way to stave off a dollar collapse is for the federal government to reverse its current expansionary fiscal policy involving record deficits and move toward “balancing the budget.” Part of accomplishing this will likely be an effort to restore a “healthy” Social Security surplus by some combination of reduced benefits and higher payroll taxes.
A third way to head off a credit explosion and prop up the dollar is for the Federal Reserve to raise bank reserve requirements. This is what the Federal Reserve under President Franklin Roosevelt did when it doubled the reserves banks were required to keep on deposit at the Fed after his re-election in 1936. This reduced by half the amount of loans banks could make.
This along with highly deflationary measures carried out by the Roosevelt administration, such as implementing Social Security taxes while putting off for several years monthly benefit payouts and cutting back or ending a number of New Deal public works programs, pushed the recovering U.S. economy back into deep depression in 1937-38.
As long as capitalism continues, it is virtually inevitable that the Obama administration and Fed chairman Ben Bernanke, or their successors, will have to adopt highly restrictive monetary and fiscal policies to once again stave off an inflationary crisis. It’s likely that a new push to “save Social Security” will be part of the package.
