Friday, June 24, 2005

They Just Don't Get It

Even the President is beginning to get the message that the American public does not want private accounts and does not want Social Security destroyed. Unfortunately, some members of Congress havn't progressed that far.

The Star Tribune got it right on the latest Republican attempt to insert private accounts into Social Security:

The plan announced by Sen. Jim DeMint, R-S.C., relies on the fact that Social Security is projected to run budget surpluses until the year 2016 as a result of substantial payroll tax increases enacted during the 1980s. Unlike President Bush's plan, which would let younger workers keep a portion of their payroll taxes and invest them in private accounts, the DeMint plan would transfer Social Security's surpluses from the government to private accounts between now and 2016.

...this plan does nothing to restore fiscal discipline in Washington or reduce federal deficits. ...

In fact, the DeMint plan subverts federal and private finances in several other ways:

• The Social Security Administration estimates that it would increase federal debt by more than $1 trillion over the next decade because revenues now credited to the government would be credited to private accounts instead.

• Social Security's surpluses simply aren't big enough to fund significant private accounts, and they will shrink rapidly starting in less than a decade.

• The plan would require $422 billion in transfers from the government's general fund to cover administrative expenses and other costs, driving up what already are dangerous federal budget deficits.

• The plan would increase retirement risk for anyone who chooses to participate. If you sign up, the government would cut your future Social Security benefits by the amount deposited in your account plus a market rate of return. If your account performed well, you would come out ahead. If not, you would come out behind. Many Americans are quite happy to take on investment risk as they prepare for retirement, but Social Security was supposed to be the one leg of the retirement stool without market risk.

Perhaps the most bizarre aspect of the DeMint plan is that it does almost nothing to address the solvency problem that faces Social Security in a few decades, a problem that Bush has emphasized relentlessly in recent months. If members of Congress want to take the initiative on Social Security this year, they should start there rather than playing old shell games they know to be phony.

The Senate Bill (S 857) needs to die in committee.


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