Tuesday, September 07, 2004


AUG 17 -- I thought I’d send something along about Bush’s Social Security plan –– something he proposed in 2000. Pushing the plan through congress is, according to Bush and his advisers, a *major* priority if he receives a second term in office. First, a few facts about Social Security:

*45.4 million people – 1 in 6 Americans – receive benefits.
*Social Security keeps 89% of our senior citizens out of poverty.
*One-third of beneficiaries – 14 million people – are disabled workers and their families, or survivors of deceased workers.
*98% of kids are protected by disability and survivors insurance – they'll receive Social Security until they're 18 if a parent dies or becomes disabled. Four million children today receive Social Security benefits.

To cover the cost of his tax cuts, Bush will have to spend the entire projected Social Security surplus of $2.4 trillion from 2005 through 2014. That’s not a Democrat’s statistic, that’s a statistic from Bush’s own Office of Management and Budget. In order to make up for this stunning depreciation of the surplus Bush’s plan calls for the partial privatization of Social Security, allowing a certain percentage of benefits to be played in the stock market. (For those counting at home, the Dow Jones Industrial Average has fallen in the last four years from 11,722.98 to about 9800. The Nasdaq has fallen from 5048.62 to about 1750. Those are drops of 17% and 66% respectively. Ouch!)

The Princeton economist and NY Times opinion writer Paul Krugman explains the implications of Bush’s Social Security plan this way:

Right now, the ownership of stocks and bonds is highly concentrated. Conservatives like to point out that a majority of American families now own stock, but that's a misleading statistic because most of those "investors" have only a small stake in the market. The Congressional Budget Office estimates that more than half of corporate profits ultimately accrue to the wealthiest 1 percent of taxpayers, while only about 8 percent go to the bottom 60 percent. If the "ownership society" means anything, it means spreading investment income more widely - a laudable goal, if achievable.

But does Mr. Bush have a way to get us there?

There's a section on his campaign blog about the ownership society, but it's short on specifics. Much of the space is devoted to new types of tax-sheltered savings accounts. People who have looked into plans for such accounts know, however, that they would provide more tax shelters for the wealthy, but would be irrelevant to most families, who already have access to 401(k)'s. Their ability to invest more is limited not by taxes but by the fact that they aren't earning enough to save more.

The one seemingly substantive proposal is a blast from the past: a renewed call for the partial privatization of Social Security, which would divert payroll taxes into personal accounts. Mr. Bush campaigned on that issue in 2000, but he never acted on it. And there was a reason the idea went nowhere: it didn't make sense.

Social Security is, basically, a system in which each generation pays for the previous generation's retirement. If the payroll taxes of younger workers are diverted into private accounts, there will be a gaping financial hole: who will pay benefits to older Americans, who have spent their working lives paying into the current system? Unless you have a way to fill that multitrillion-dollar hole, privatization is an empty slogan, not a real proposal.

In 2001, Mr. Bush's handpicked commission on Social Security was unable to agree on a plan to create private accounts because there was no way to make the arithmetic work. Undaunted, this year the Bush campaign once again insists that privatization will lead to a "permanently strengthened Social Security system, without changing benefits for those now in or near retirement, and without raising payroll taxes on workers." In other words, 2 - 1 = 4.

Four years ago, Mr. Bush got a free pass from the press on his Social Security "plan," either because reporters didn't understand the arithmetic, or because they assumed that after the election he would come up with a plan that actually added up. Will the same thing happen again? Let's hope not.

As Mr. Bush has said: "Fool me once, shame on - shame on you. Fool me - can't get fooled again.

Some of you on this list are approaching retirement age. The rest of you will get there some day. And beyond our personal difficulties there are clearly millions of citizens whose lives would be catastrophically effected by a shortage in Social Security benefits. Bush is completely serious about pushing his plan through Congress. Worth thinking about.


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