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political effects would be sharply increased support for

free-market economic policies.  Since workers would own part

of the nation's businesses, they would become more skeptical

of unnecessary tax burdens and regulatory market interfer-

ence that harm business performance.  Since workers would

own much of the nation's capital, they would oppose harsh

multiple taxation of capital gains.  General strife and

antagonism between labor and management could be replaced by

cooperation, since workers would benefit directly from the

general prosperity of companies in which they shared owner-

ship.  As Alan Greenspan has explained, "[If workers] knew

what they owned in their retirement programs as distinct

from having a generic overall type of program, there [is] a

considerable amount of pride in that, and it has a very

important effect on people's citizenship in society."18

Alternatives to Privatization Would Hurt Union Workers

Social Security is facing a severe financial shortfall.

In fact, by 2013 Social Security will begin to run a defi-

cit--spending more on benefits than it collects in taxes.19

In the absence of privatization, Social Security will be

forced to raise taxes or cut benefits, options that would be

very painful for union members.

Social Security has already raised payroll taxes 38

times since the program began, with serious consequences for

workers.  According to the Congressional Budget Office,

payroll tax increases between 1979 and 1982, for example,

resulted in the permanent loss of 500,000 jobs.20  A study

of the 1988 and 1990 payroll tax hikes, by economists Gary

Robbins and Aldona Robbins, estimated permanent job losses

at approximately 510,000 and a reduction of the U.S. gross

national product of $30 billion per year by the year 2000.21

Also important is the fact that the payroll tax is an

extremely regressive tax.  First, it is a tax on wages,

leaving other income sources, such as capital gains, inter-

est, and other profits on investment, untaxed.  Second,

because the amount of income subject to the tax is capped,

low-income workers pay a higher percentage of their income

in Social Security taxes than do high-income workers.  As a

result, the payroll tax is a tax aimed directly at union

workers.

Benefit cutbacks would also disproportionately affect

union workers.  For example, delaying retirement imposes

only a modest burden on many white-collar workers and manag-

ers, but can mean substantial hardship for many blue-collar