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To: RealMuLan who wrote (20948)	1/10/2005 6:28:45 PM
From: RealMuLan	Respond to of 116555

Social Security Shift Might Boost Borrowing Costs Mon Jan 10, 2005 01:04 PM ET By Tim Ahmann WASHINGTON (Reuters) - President Bush's plan to move to private Social Security accounts will trigger trillions of dollars in new U.S. government borrowing that is likely to push interest rates higher, analysts say. The White House has indicated it would tap the bond market to help finance benefit payments during any transition to a partially privatized system. Financial markets could digest the borrowing, but not without the sweetener of at least somewhat higher rates, analysts say. Currently, the system is running a surplus that the government has been tapping not only to pay retirement benefits, but for other government spending as well. If workers diverted part of their payroll taxes to private accounts, the government would need to raise cash to cover benefits. While President Bush has yet to back any specific Social Security proposal, those costs are expected to run to trillions of dollars. A proposal from a commission named by Bush in 2001, one the White House has examined closely, carries a transition cost some economists peg at $2 trillion or more in the first decade. And the borrowing does not stop there. An analysis by the Social Security's chief actuary showed that if all workers chose individual accounts, government borrowing would keep mounting for close to 40 years, topping out at an inflation-adjusted $4.7 trillion. If such a plan were implemented, the government would borrow more than it would otherwise for 58 years, the actuary said. Some private account proponents argue costs should be gauged on a "present value" basis, adjusted not only for inflation but also to recognize $1 today is better than $1 at some future date since you could have invested the money. On that basis, the actuary pegged transition costs at a slimmer $1 trillion. In its own 2004 analysis, the White House said the plan would boost government debt as measured against the economy by 23.6 percentage points by 2036. The debt-to-GDP ratio, a metric favored by economists, stood near 37 percent last year. Continued ... © Reuters 2005. All Rights Reserved. reuters.com