WASHINGTON, FEB. 18, 1999-Union leaders are threatening investment firms with the loss of billions of dollars in pension funds if those firms support Social Security privatization, according to a recent article in Investment News.
In a letter to the chief executives of nine investment firms, top officials of the AFL-CIO and other union leaders demand to know each firm's position on privatization and warn that a pro-privatization stance may result in the loss of union pension money, the article reports. At stake is $371 billion.
This prompted a strong response from William Beach, a Heritage Foundation economist who has done research showing that union workers would retire with more money if allowed to invest their Social Security taxes in private accounts.
"It's astounding to see union leaders stoop to these strong-arm tactics," Beach said. "They're trying to cut off debate on an issue of great importance to their members. I don't think extortion is too strong a word to apply to what they're doing."
Further evidence that union officials will mount an aggressive campaign to fight Social Security reform came just yesterday. According to The Washington Post, leaders of the AFL-CIO announced at their annual meeting in Miami Beach that they will keep their political activists fully mobilized for the next two years to remain active on issues such as Social Security.
Union officials claim even partial privatization of Social Security poses risks to their members. But Beach's research shows that union workers will receive far more retirement income if they invest their payroll taxes in stocks and government bonds.
Beach and Heritage Policy Analyst Gareth Davis examined Social Security's rate of return for workers in 13 heavily unionized professions-mining, construction, manufacturing, transportation, communications, public utilities, public administration, teaching, truck driving, hotels, law enforcement and fire fighting.
For example, a typical miner-a married 45-year-old with two kids-will pay $188,285 in lifetime Social Security taxes and receive $452,629 in benefits. If allowed to divide his Social Security taxes evenly between blue-chip stocks and Treasury bonds, this same miner would have $647,943 for retirement. The net loss to the family: $195,315.
White-collar union workers fare just as poorly. For example, a 30-year-old married couple, both of whom teach, will pay $268,000 in Social Security taxes during their careers and get back $559,000 in Social Security benefits. But they could have a retirement nest egg worth more than $763,000 if their Social Security taxes were invested privately. Their permanent income loss: $204,000.
"This debate is too important to let union officials silence those with a different point of view," Beach says. "Union workers deserve to hear about reform options that could boost their retirement income and help them build nest eggs for their children."