John Snow, Treasury Secretary, says his job is to advance Bush's agenda. He appeared to have a hard time doing that today on Fox News Sunday.
Caveat:no transcript yet and I do not know shorthand, this is not quite verbatim.
Mr. Snow says that we do not have any option but to fix Social Security. Chris Wallace did not allow him to evade questions, or get away with parroting the party line.
[New] John Snow had some difficulty with Wolf blitzer on CNN Late Edition as well.
When asked if benefits would be cut, Mr. Snow admitted that earnings from personal accounts would substitute for benefits from Social Security, and so would therefore reduce the claims on Social Security. He believes this is a great idea because funds in personal accounts have the potential to grow faster than Social Security funds.
Chris has been reading his emails. He asked Mr. Snow what would happen if the market did not reward personal accounts as anticipated. Then Mr. Snow backpedalled and said that the personal accounts would be "a supplement, an add-on."
Chris Wallace: "But you just said it was a trade-off."
Mr. Snow said not to worry, personal accounts will be in safe investment vehicles. It sounds like the government plans to tell us where to invest our money, thus contradicting their position that the main advantage of personal accounts is that the money belongs to individuals, not the government. It sounds like the personal accounts will have government regulation, but not government accountability.
Besides, "it's all voluntary." I would not trust any such promise. One thing about these kinds of programs is that they can change the rules of the game. When IRA's first came on the scene, the contributions were not tax-deferred. One year later the rules were changed so that contributions were tax-differed. Because I was overseas, my contributions were already tax-free. I wanted to cancel my IRA because it did not make sense to me to put tax-free money in an account only to pay taxes on it later. They changed the rules, but I was not allowed to therefore withdraw from the game without penalty.
Then the IRS said you could use IRA money for health insurance if you were unemployed. I did that when I first came back to America. Later they changed the rules to define "unemployed" as those who received unemployment benefits. Since my overseas employer did not pay into the US unemployment system, I was ineligble for for benefits. The IRS took the 10% penalty. I learned that you cannot trust that the rules will not be changed.
Mr. Snow said that Wall Street will "applaud" personal accounts. No kidding! I repeat, trusting the market is foolish. What happens to the value of a retirement portfolio based on stocks when the massive sell-off begins to actually pay for life in retirement. The stock market operates on the principle that for everyone buying there is someone selling (more or less). Or that a particular investor remains mostly fully invested; selling stock to buy other stock. What happens when people are cashing in? Since the value of stock decreases during selling, will people discover that their retirement account is worth far less than they thought? What if all these private accounts cannot beat the statistic from Sept 6, 2004 Business Week that small investors are getting an average 1.5% yield on their stocks? At least Social Security is making 3%.
Fox News Sunday (12/12/2004) made the point that historically the stock market has outperformed just about any other investment. One problem is that a stock may perform a whole lot better than an investor. Another problem is the massive sellout necessary so that seniors have the money to buy their groceries, etc has no historical precedent, except maybe the one prior to, guess what, the Great Depression which spawned Social Security in the first place.
Democratic Sen. Jon Corzine of New Jersey, former head of the Wall Street investment firm Goldman Sachs, made a further point, saying personal accounts would undermine Social Security's long-standing role as a provider of stable guaranteed retirement benefits. "In any given 10- or 15-year period, you can have ups and downs in markets that could leave the retiring group of individuals at that point at great risk." Faith-based social security is simply foolish.
Chris Wallace asked Mr. Snow about payroll taxes. Mr. Snow said that Bush really meant he would not increase the rates. Under probing, Mr. Snow quoted Bush as saying, "no increase in taxes."
Chris: "Which you understand as rates."
Mr. Snow: "The president said no increase in rates."
(Andrew Card on CBS This Week says raising the ceiling is on the table).
Mr. Snow also indicated that replacing the current income tax with a flat tax or something similar is on the table with specific recommedations to come out in 2005.
Update [2004-12-19 13:46:49 by azindy]:
John Snow's Problems on CNN Late Edition
Wolf asked about the 2000 surplus of $227B. Mr. Snow replied that it was not an actual surplus, but merely a forecast that did not come to pass. Wolf interrupted him, "No, it was an actual surplus, not a forecast." After some back-and-forth, Mr. Snow admitted it was a real surplus, but could not be continued given subsequent events such as 9/11.
It was clear from Mr. Snow that the Bush administration intends to repeat over and over, "[The Social Security] system isn't sustainable. It is really broken. It's got to be fixed."
Wolf then cited a recent Wall Street Journal poll that 50% of Americans do not think privatization is a good idea (38% think it is a good idea). The same poll found 40% of Americans NOT confident that they will receive benefits from Social Security in the future with 52% expressing various degrees of confidence from low (33%) to high (8%).
Wolf asked, "What if the stock market fails?" Mr. Snow believes it will not fail young people who start in their 20's, and Bush has promised that his plan will not affect people close to retirement.
Let's examine these assertions.
1. Promises may not be kept.
2. It is likely there will be a massive sell-off driving prices down. Ideally, this would be the best time to buy, but more than likely will only trigger more selling. The small investor will likely be too afraid to buy. [See this article http://www.onlinejournal.com/Special_Reports/120104Goya/120104goya.html].
[editor's note, by azindy]I do not understand why the update did not format like an original diary. I did not type it in all run together. Maybe someone can tell me how to fix it.