El Sol, Commentary,
By Sam Cesfar
- Feb 08, 2005
In the first State of the Nation of his second term, President George W.
Bush last Wednesday laid out his plans to make radical changes to the
country’s Social Security system, which he argues will be bankrupt by the
year 2042. But according to Congressman Sam Farr (D-California), the
president’s intentions are not to prevent the system’s presumed collapse,
but to eliminate the essential purpose it was created for. Latinos would
be among those most affected by the President’s plan, which follows the
same models used in Chile and Mexico.
Created by President Franklin D. Roosevelt to save millions of elderly
people from poverty during the Great Depression in 1935, Social Security
is one of the pillars of American society.
Social Security functions by taxing today’s workers to provide checks for
today’s retirees. When a worker retires, his social security check, in
turn, will come from the workers at the time.
The reform that Bush is proposing would create individual accounts where
each worker contributes part of his or her salary to a personal retirement
fund, “a conservative mix of bonds and stocks that would produce a larger
return, giving autonomy to the savers,” as he said in his address on
Among the groups most affected by the reform will be Latinos. Each year,
the program keeps 32.9 percent of Latinos over the age of 65 out of
poverty, said Farr during a conversation in his Salinas office last
Monday. “Many elderly Latino people rely on that payment every month.”
Carmen Obeso, 77, says that the reforms Bush is pushing for don’t affect
her, “but we have to think about the young people in our family, and this
isn’t good for them,” she said over lunch at the Support
for Seniors, in the Salinas Firehouse.
The Case of Mexico and Chile
“The president is copying the model of the system that was implemented in
Chile,” says Farr. Mexico also followed the Chilean model when, in 1997,
it reformed its Social Security law to Administrators of Retirement Funds
(Afores in Spanish). In the Afores, each worker has an individual savings
account, and deposits a contribution every two months, adding to the money
deposited by the employer and the State.
Mexico’s Afores charge workers a fee of 30 percent of the total amount in
the savings account, according to a study by the Mexican House of
Representatives’ Social Security Commission last year.
Farr says that what the president wants to do is to put workers’ money
into the hands of market investors. “The only people who are going to win
with this reform are the investors.”