"...Bush went off script to warn a group of teenagers, "The system will be bankrupt by the year 2040."
That sounds pretty scary--except that it's not true. What will actually happen in 2018, according to the Social Security trustees who oversee the program, is that the money paid out in benefits will begin to exceed the amount collected in taxes. And since Social Security will run a surplus until then (and has been running one for some time), it has billions available that it can tap to fill the gap. Even under conservative estimates, the system as it stands will have enough money to pay all its promised benefits until 2042 and most of its obligations for decades after.
What's more, even if you take the President at his word--that a crisis and bankruptcy are fast approaching--the introduction of private accounts does nothing to slow that process. On the contrary, it makes things worse, by diverting payroll taxes from current retiree benefits and bringing the end of surpluses that much closer. Given all that, what is the President after?
As Moore learned when he visited Austin, Bush's fascination with Social Security began before he got to Washington. As Governor, his advisers say, he was struck by the experiences of local governments in places like Galveston County that had allowed their employees to opt out of government retirement plans and invest the proceeds in private funds--yielding legends of courthouse janitors retiring with $750,000 nest eggs. As Bush planned his first presidential campaign, he brought in experts to brief him on how privatization had worked in places like Chile, and even Sweden--surely one of the rare instances of a Republican taking the lead from a country known for a near socialist welfare system.
Democrats have darker views of Bush's motives, saying it has been a long-standing Republican goal to dismantle the vestiges of the New Deal and the basic contract it struck between the government and its citizens. They also contend it is perfectly in keeping with everything they know about Bush that he would create the mirage of pending catastrophe to achieve that goal.
"We have an Administration that falsely hypes almost every issue as a crisis," the liberal lion Edward M. Kennedy said in a speech last Wednesday, which happened to be the same day the Washington Post was reporting on its front page that the CIA had quietly given up its hunt for weapons of mass destruction in Iraq.
"They did it on Iraq, and they are doing it now on Social Security." (As for voters, they don't seem to know what to make of the real situation: in the TIME poll, 45% agreed with Bush that the system faces a "crisis"; 44% said the claim was just a "scare tactic.")...
All of which explains why rank-and-file Republicans on Capitol Hill--who haven't forgotten how they used to get clobbered for entertaining even modest Social Security changes--aren't exactly storming the microphones to pledge their unconditional support for anything that would change the basic outlines of this arrangement. Anxiety is especially high in the House, where all 435 lawmakers have to run for re-election next year.
"I've told my staff we are going to keep all options open. I'm not saying yes or no at this point," says Republican Congressman Mike Castle of Delaware, who leads a group of Republican moderates known as the Main Street Partnership. "It's well and good to say the average gain [in an investment account] would be higher than if you left it in Social Security, but there's a definite certainty to Social Security. When you're in the market, you're subject to the whims of the market."
What's more, studies of how Americans invest their 401(k) accounts suggest that, given the chance to make choices, most can't even beat a basic index fund....
===========
Oh bloody heck, most can't figure out what an index fund is.
===========
"...Bush's approach has met near universal opposition among Democrats, labor and liberal groups. The formidable AARP, a crucial ally in his successful fight last year for a Medicare prescription-drug program, is on the other side this time. It has already started newspaper ads warning that private accounts are simply too risky. "It's a little ironic that the AARP would be saying that, since one of the major things the AARP does is run [an investment program] for retirees," countered Treasury Secretary Snow in an interview with TIME. "The President made it clear that these plans are not going to be high risk. You're not going to be allowed to bet on any stocks or go out to the roulette wheel."...
A group called Progress for America, which has close ties to Bush political guru Karl Rove, went on the air last week with its first television ad, comparing Bush to F.D.R. Democrats quickly circulated a blistering demand by Roosevelt's grandson James Roosevelt Jr. that the group quit using his grandfather's image: "To compare the courage it took to provide a guaranteed insurance program for our seniors and the disabled to the courage it will take to dismantle the most successful social program in history is simply unconscionable."...
One of the most crucial interest groups will be Wall Street. But where, precisely, is its interest? The general assumption has been that investment firms stand to gain a windfall from money that would flow into the new accounts. At the other end of the Street, the bond market could turn thumbs down on the grounds that trillions in new government borrowing would hurt the economy, raise interest rates and make the dollar suffer. But both assumptions may be overblown, financial experts say. Though University of Chicago economist Austan Goolsbee has estimated that the financial-services industry could reap $940 billion in fees over the next 75 years from private accounts--real money, even by Wall Street standards--some firms say the accounts look more like a headache than a bonanza. "Wall Street is at best ambivalent. The size of the accounts is nothing big," says Robert Pozen, chairman of MFS Investment Management. "How many Wall Street firms do you know that are running after people with $5,000 accounts?"
At the same time, the bond market may not be an obstacle. Snow heard caution but little naysaying when he made a pilgrimage to Wall Street last week. In a meeting on Tuesday with bond traders, he explained that the government might have to borrow $100 billion to $150 billion a year for 10 years to finance the new private accounts. Participants say the traders told Snow that the markets could easily absorb that much. As a bond executive said, "Mr. Secretary, that's a rounding error in our business."
The most ardent Republican supporters of private savings accounts say that Bush, having decided to take the plunge, should go all the way. He's expected to propose allowing workers to put one-third of the 6.2% payroll tax that is deducted from their paychecks into individual accounts. But advocates like Gingrich and antitax activist Grover Norquist want to know, Why not more? "It's going to take exactly the same amount of energy," Gingrich says. "You are better off trying to get the largest possible account."....
============http://www.time.com/time/magazine/article/0,9171,1018052-1,00.html |
