Wednesday, February 09, 2005

I've been thinking about Bush's plan for Social Security. Up until recently, the whole thing's been pretty vague, and it's not much clearer now, what with the constantly changing nomenclature (for the record, I'll be sticking with "private accounts", even though it's not much more accurate than "personal accounts") and occasional out and out lies.

Now, you all know, unless you're brand new to the site, that I think our president is a damn liar and an incompetent to boot, lacking the basic fiscal sense to turn a profit selling water in the Sahara. Most of the time when he suggests some mutton headed nonsense (manned missions to Mars anyone? Steroid use?), I just ignore him and figure he'll lose interest the next time a shiny object moves in front of his eyes. But this one doesn't seem to be going away, so it might be worth it to take a look at the merits of this one.

Having come of age in the 80s, I never expected that Social Security would be there for me. That's more or less an article of faith for my generation (that would be "X"). I still don't, really. That kind of cynicism is the natural result of following the baby boomers through life. But, based on everything I've read, it seems that the greatest danger to Social Security right now is Bush's Republican Party.

Here're the facts, as I understand them, with a certain fudge factor due to my having been an English major, not an economics major:
  • Right now, the amount paid into Social Security is greater than the amount paid in. This is intentional, to build up a surplus for when that is no longer the case.
  • According to the Social Security administration's most pessimist projections, 2042 is the year when this surplus will run out.
  • We each pay Social Security only on the first $90,000 of our income. Anything above that has no Social Security taken out.
  • Raising that amount would solve the problem.
  • If we ignore the problem, benefits will eventually have to be cut by around 20-25%.
Here are the facts of Bush's plan, as near as I can figure out:
  • Even his own people admit that it won't actually solve the problem.
  • To pay for it while continuing to pay out benefits, we'll have to borrow several trillion dollars. And then there are the transitional costs. And the new bureaucracy to maintain it all.
  • By changing the way benefits are indexed (to inflation instead of wages), benefits will be cut by as much as 50%.
  • The government will even out the risk factors, so that people whose investments do poorly will still make the median amount. If you do really, really well, the government will take the lion's share of "your" profits.
  • With the benefit cuts factored in, you'll end up getting less money out of the system than if they'd just left everything alone.
  • The first thing you get to do when you retire is buy an annuity for X years that cannot be left to your family when you die. In other words, your first act as a retiree will be to fill out a government form gambling on how much longer you think you'll live. If you guess high, the government keeps your money. If you guess low...well, it's hard to get a straight answer out of them on this one.
  • You will have little or no say in how this money is invested.
  • There are folks on Wall Street who stand to make millions, possibly billions, if this plan becomes law.
So, trillions of dollars of our money goes to people who are already filthy rich, Social Security is still in need of help, our benefits will actually go down, and the government ends up even deeper in debt. At this point, I really only have one question: I know why Wall Street wants this to happen. What's everyone else's excuse?

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