SOCIAL SECURITY
Worst. Privatization Plan. Ever.
Social Security privatizers have spent months mocking the idea of a Social
Security surplus
(http://www.whitehouse.gov/news/releases/2005/04/20050405-1.html) . Now they are
banking on it to revive their sinking political prospects. Sens. Rick Santorum
(R-PA), Lindsey Graham (R-SC) and Jim DeMint (R-SC) will introduce a bill that
would divert surplus Social Security funds into private accounts
(http://www.washingtonpost.com/wp-dyn/content/article/2005/06/17/AR2005061701442.html)
. It's their worst idea yet. The new privatization plan would require hefty tax
increases, massive program cuts or tacking on billions to the federal deficit.
Even so, it does nothing to improve the solvency of Social Security -- in fact,
it makes things worse. But the bill's sponsors say they'll "address those
concerns later." First, they want to "create momentum and enthusiasm for Bush's
proposed private accounts." The White House said the new idea " is worth taking
a look at
(http://www.baltimoresun.com/news/nationworld/bal-te.social19jun19,1,5649050.story?coll=bal-nationworld-headlines)
." Wake us up when the party's over.
NEW PRIVATIZATION PLAN WOULD EXPLODE FEDERAL DEFICIT: The Wall Street Journal
claims that the proposal (which it calls "political jujitsu") would " create no
new debt for the government. (http://www.opinionjournal.com/diary/?id=110006844)
" That's not true. Right now, money that is collected from Social Security
payroll taxes that is not needed to pay current Social Security benefits is used
to pay for other government programs. Absent an accompanying package of tax
hikes or program cuts (don't hold your breath) the new privatization plan would
divert all of those funds to private accounts and make our current deficit
problems much worse. For example, using the Social Security surplus to help make
ends meet, the 2006 budget deficit is expected to be around $400 billion
(http://www.washingtonpost.com/wp-dyn/articles/A58762-2004May26.html) . The
Social Security surplus is expected to be $170 billion (see table S-10
(http://www.whitehouse.gov/omb/budget/fy2006/tables.html) ). So if this new
privatization plan were to be enacted, next year's deficit would skyrocket to
$570 billion. Things get worse over time. In 2009 the new plan would add an
additional $230 billion to the federal deficit.
THE SANTORUM FLIP-FLOP: Santorum's involvement in the budget busting plan is
especially puzzling. In 1999, Santorum introduced a bill that would have
required "all Social Security surpluses ... [to] be dedicated to reducing the
publicly-held Federal debt." Santorum said, "when one considers that the system
is already in fiscal jeopardy, spending this money only aggravates the problem."
Now Santorum has a proposal that would spend the money and aggravate the
problem.
NEW PRIVATIZATION PLAN WOULD WEAKEN TRADITIONAL SOCIAL SECURITY: The new
privatization plan would also weaken traditional Social Security by raiding the
Social Security trust fund. Under the current system, when surplus Social
Security funds are spent on other programs, the government creates a binding
obligation to repay the money at a later date. Because of this trust fund, the
government will be able to pay Social Security benefits at current levels until
at least 2052 (http://www.cbpp.org/6-14-04bud.htm) . The new privatization plan
would eliminate all future contributions to the trust fund, undermining the
program's long-term solvency. If the program becomes insolvent, the government
will be forced to make deep cuts in guaranteed benefits. Of course, that's what
all these privatization plans are really about.
THE REAL GOAL -- PERMANENT PRIVATE ACCOUNT CARVE-OUTS: The use of the Social
Security surplus to fund private accounts is just a gimmick. The real goal
remains the same: finding a way to divert payroll taxes from a guaranteed
benefit to private accounts. DeMint explicitly told the WSJ that if his plan was
enacted into law, "Congress would be compelled to find a way ... to ensure
their continuation after payroll tax surpluses dried up.
(http://www.opinionjournal.com/diary/?id=110006844) " That means diverting money
from Social Security payroll taxes, further eroding the guaranteed benefit. |
