Bush's Social Security Agenda

The Purpose of Privatization. With some minor adjustments, we could make Social Security solvent for the next 75 years. But then the government would have to hand back the surplus. So why not "privatize" Social Security by transferring a small portion of each year's payroll tax into a personal savings account for each worker? Then, we could cut the benefits Social Security would have to pay and pray the market makes up the shortfall.

One Plan. Here's how the most popular of the Bush Commission's proposals (pdf) would work.

First, reduce benefits for everyone under 55 today by changing the way in which they are adjusted for inflation - from wage indexing to price indexing. Commission members admit THIS CHANGE ALONE WOULD SOLVE SOCIAL SECURITY'S LONG-RUN FINANCING PROBLEM AND EVEN PRODUCE A SURPLUS.

Next, add "voluntary" personal accounts financed by up to 4% of payroll taxes paid for each worker (up to $1,000).

Then, for those who opt in, reduce their Social Security benefits again - charge them for how much their account contributions "cost" the Social Security trust.

Finally, to pay for setting up the personal account system, ADD GENERAL REVENUES TO SOCIAL SECURITY FOR THE FIRST TIME - estimated at $4 billion in 2010, up to $73 billion in 2016 and who knows how much into the future.

What's the Point? It's not to "strengthen" Social Security, obviously. It's ideology. First, it's about the size of government. Adding personal accounts would reduce the amount the government would have to pay back into the trust by cutting benefits and reduce the amount Congress could spend in the future by putting contributions into individual accounts rather than the trust. Second, it's about the role of government. Adding personal accounts shifts more of the responsibility for retirement income as well as its risks from a guaranteed government program to workers.

Could it Work? It might but it's risky. Social Security provides critical retirement income that keeps millions of Americans out of poverty in old age. Privatizing Social Security means these workers, largely low-income, must play the stock market - and win - to duplicate the income they receive today. And many of these workers will little or no retirement income from the private pension system to make up any shortfall.