Social Security and the oxymorons
Marie Cocco
February 8, 2005
As the year began, I said there were only two things Americans really needed to know about President George W. Bush's plan to remake Social Security: It isn't social and it isn't secure.
Now add two more truisms: It doesn't fix Social Security's finances. And it's not (really) your money.
The administration's habit of pumping up legitimate policy concerns into hyperbolic crises (WMD anyone?) haunts its proposal for Social Security overhaul. The president has warned for months that the program was going bankrupt, that no traditional fixes would shore it up and that creating private accounts would be its salvation.
The private-accounts-as-fiscal-rescue-plan pervaded Bush's rhetoric during his two presidential campaigns and, pretty much, right up until last week.
Then, something extraordinary happened: A "senior administration official" who briefed reporters told the truth. The transfer of payroll tax money into private accounts would in the long term have a "net neutral effect" on Social Security's fiscal situation. A "fair inference," the official said, is that private accounts do not contribute to solving Social Security's coming solvency problems.
So the president's plan does precisely nothing to address the crisis he keeps warning us about.
This is not news to those who've followed the push for Social Security privatization for more than a decade. In all that time, no comprehensive privatization plan has been shown to come up with the money to make up the funding shortfalls expected to hit the trust fund around mid-century. Bush's own Social Security commission said in its 2001 report that private accounts don't do the job. The White House hoped we wouldn't notice. Few did, until that daring "senior administration official" came clean. So why diminish the security of Social Security with private accounts?
To hear the president tell it now, the point is to create an "ownership society" that not only makes people better off, but gives them something to pass on to their families. "Your money, you own it, you can pass it on to whoever you want," Bush said on Friday in Omaha.
This, too, is inaccurate.
By the White House's own account, people who opt for personal accounts would first have to agree to deep benefit cuts in the guaranteed portion of Social Security. Then, at retirement, they would be required to purchase an annuity - a contract for fixed, monthly benefits to be paid out over their remaining years - and not treat the account as a lump sum to use as they wish. If a retiree dies at say, age 68, the rest of the annuity would be lost.
The White House says anything left after the annuity is purchased would constitute the "nest egg" the president dwells on. But according to calculations by the nonpartisan Congressional Budget Office, a typical middle-income retiree, even with the money from personal accounts, still would face reduced income in retirement. So what would be left to pass on?
The president loves to talk about leaving money to heirs. He shies from a word more familiar to Social Security's actuaries: survivors.
Say a 25-year-old single man opts for a private account, and agrees to offsetting future benefit cuts. Being 25, he believes each year will be better than the last and that he will live, if not forever, then at least until he's packed up and gone fishin'. By age 35, the man has two toddlers and a wife who has left her job to care for them.
Suddenly, the family portrait fades to black. The man dies in a car accident, leaving not a plump nest egg but a legacy of his youthful decision. He hasn't accumulated much in his private account, he's already agreed to the benefit cuts - and now there's a widow with two kids to support.
The current Social Security system provides for them. Would the president? How?
We do not know because Bush hasn't told us. The "senior administration official" is mum.
But the truth has a way of dribbling out. And if these past few weeks are a guide, it's bound to be bad.
'The president's plan does precisely nothing to address the crisis he keeps warning us about.'
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