The year is 2036. Bill Gates, by now only a shriveled brain in a jar wired to a blinking Vivitron, plays video games. Gates–or at least his neurons–doesn’t realize that he’s poor, kaput, about to be unplugged.

George W. Bush remains in a persistent vegetative state. He laughs, he cries and he defends the privatization of Social Security. “The government can’t take away your personal account,” he repeats, pathetically, horrifically. When those private accounts were kicked off in 2012, the stock market, hyped up by two trillion dollars in new cash siphoned from the Social Security Trust Fund, took off like a bat out of hell. The Dow hit 16,000. Then, in 2030, the babies of the Baby Boomers retired and began to sell their stocks. And sell and sell. But there was no one to sell to. The boom of 2012 became the bust of 2036. The last Mekong Motors (formerly, General Motors) auto rolled off a U.S. assembly line and SinoSoft folded its Microsoft subsidiary.

Looking back, the 93-year-old Paul Krugman jumps over his walker, shouting, “I told you so!”

You have to love Paul Krugman. How he stays with The New York Times and keeps his soul is a great mystery. Krugman, bless him, has been riding up and down the East Coast for the last decade like a financial Paul Revere shouting, “Privatizing social security is a fraud! Privatizing social security is a fraud!”

Unlike columnist Thomas Friedman, Krugman does not pretend to be an economist–Krugman actually is an economist. But here, he may have let his patriotism gum up his calculator. Let me explain. President Bush insists that every American will earn a bigger pension if only we invest our Social Security funds in the stock market rather than let the U.S. Treasury invest our retirement in Treasury bills. The market, says our President, will “outperform” Treasury bills (that is, win a higher return) forever and ever. It’s money for nothing. Just shift your retirement fund from the Treasury bond market to the stock market.

There’s a problem with our President’s fishes-and-loaves sales pitch for Social Security privatization. First, the cold laws of finance tell us that the market cannot provide us risk-free returns above Treasury bills forever. If that were true, no one would ever buy a Treasury bill–and then how would Mr. Bush finance his deficits?

Second, it’s true the stock market zoomed over the last couple of decades. But the American economy is aging, and those big gains are history, long gone. Because our Social Security insurance payments purchase Treasury bills, our Social Security trust fund is, in effect, a giant bet on the U.S. economy. Our “profits” on this investment in ourselves, cautions Krugman, are “equal only to the rate of economic growth” in the USA. Think of the total value of all investments in the USA. Slice it any way you want–into stocks, bonds and Treasury bills held in private accounts or public accounts. Change the size of the slices or rename them from “public” to “private”–you can’t increase the ultimate size of the America pie.

But then, who says Mr. Bush expects us to invest in America? The USA’s economy grows by 4% in a very good year. But China is rising at 9% per year, twice as fast as America. There is one flaw in Krugman’s calculations. Krugman’s error is that he’s a patriot, and therefore cannot understand our rulers’ cold agenda. As professor Joseph White of Case Western Reserve University explained to me:

Social Security privatization is the realization that America’s economic growth is at a plateau, on a flat line-whereas China and India and Malaysia are taking off-providing market returns twice that of U.S.-based industry. In other words, Social Security privatization is about moving our capital from a dying economy (America) to rising economies, like China.

The money flows out, it flows back in, then it flows out again.

There is nothing new in this process of national abandonment. In
the twentieth century, the elites of Argentina and other Third World
nations sold their plantations and mines and infrastructure to foreign
(i.e., American) multinational corporations. Argentina’s “ricos” cashed
out and moved to Miami. In the twenty-first century, it is America’s
elite that is cashing out, abandoning ship. They will maintain their
condos in New York, but their capital will live abroad. Your Social
Security funds will subsidize their escape, leveraging their foreign ventures.

But what do we do with the old folk? While some of our Social Security tax goes to buy Treasury bills, most still goes to pay today’s retirees. This is America’s “pay-as-you-go” system. How do we keep up payments to those already retired, who’ve paid their insurance over a lifetime, if we withhold our money for private accounts? We can’t.

The privatizers in the Administration call this potential for disastrous collapse of old-age pensions a “transition issue.” In fact, it’s a debt of up to $3 trillion to current retirees. We must get it by borrowing or by cutting benefits or by taxation (in other words, a Social Security tax to replace the Social Security tax). There’s only one way around this “transition” conundrum: The Soylent Greensolution. I’ve heard the White House is carefully studying the transition method used in that old sci-ficlassic: The elderly can be turned into a cheap source of protein.

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The above excerpt is from Armed Madhouse: Dispatches from the Front Lines of the Class War” by Greg Palast. Order it now.

Penguin releases Armed Madhouse on June 6. Hear comic Randy Credico read George Bush on Social Security on the audio edition of Armed Madhouse, available from Simon & Schuster, read by Credico, Larry David, Amy Goodman, Jim Hightower, Randi Rhodes, Greg Palast and other friends.