Privatization won't fix the problem. In fact, it will only
make the problem worse.
To Mr. Bush, letting workers divert a third of their Social Security payroll taxes to personal retirement accounts is central to his concept of an "ownership society" in which individuals take on more responsibilities. But the accounts wouldn't prevent the program's projected insolvency at midcentury; in the short term, they would make its finances worse. Because workers' payroll taxes fund current retirees' benefits, diverting any amount forces the government to make up the difference.
When the Wall Street Journal recognizes that your plan for investing more money in the stock market is only going to make things worse, brother, you have a bad plan. The Journal doesn't stop there, they also note several other problems, a simple solution, and that Bush lied about Clinton in the state of the union speech
Republicans can't stop blaming Clinton for problems, and when it comes to Bush, he seems to be unable to quote anyone but Democrats. Don't Republicans ever have an original idea? In the SOTUS, Bush went through a litany of "tough love" ideas for Social Security, pinning them all on Democratic sources.
"Some have suggested limiting benefits for wealthy retirees. Former Congressman Tim Penny has raised the possibility of indexing benefits to prices rather than wages. During the 1990s, my predecessor, President Clinton, spoke of increasing the retirement age. Former Senator John Breaux suggested discouraging early collection of Social Security benefits. The late Senator Daniel Patrick Moynihan recommended changing the way benefits are calculated. All these ideas are on the table."
As usual with Bush, he's twisting the truth a little, well some, well all the heck out of shape. Yes, some form of these words came from these people, but not in the way Bush suggested. With Clinton, for example, former Clinton adviser Gene Sperling says Bill never pushed for an increase in the retirement age.
While the idea of raising the eligibility age for Social Security came up, Mr. Clinton never proposed it. "It is deceptive, misleading and unfortunate for the president to suggest President Clinton supported raising the retirement age when he knows that's not accurate."
But you know, you have to take your Clinton pot shots when you can.
Now, back to problems with the Bush idea. With private accounts only adding to the massive debt, who's going to support idea? Not Democrats, and maybe not some Republicans.
But for now, the proposed borrowing will be hard for many Republicans to support, and will stop conservative Democrats from coming to Mr. Bush's side.
"I don't agree that we borrow this money," said former Rep. Charles Stenholm of Texas, whose endorsement the White House has been seeking, given his influence with other conservative Democrats still in Congress.
"They have a legitimate concern. The effect on the deficit is real," said Republican Sen. Lindsey Graham of South Carolina, who has been seeking a bipartisan plan. "If we're arguing about the effect of personal accounts on the deficit, reformers lose."
Ouch. Doesn't sound like Lindsey wants to run as the guy who helped pile two trillion more on the deficit, does it?
But the WSJ article isn't all doom and gloom. The actually point out the solution.
Mr. Bush has ruled out raising payroll taxes. But many Republicans in Congress say that while Mr. Bush is dead-set against raising the 12.4% payroll-tax rate, the administration has left the door open to raising the cap on the amount of wages taxed, now set at $90,000. Repealing the cap altogether -- as with Medicare's smaller payroll tax -- would close Social Security's projected 75-year funding gap.
The emphasis is mine, but coming as it does from the pages of the Wall Street Journal, this should already have the boldness of a thunderclap. Think about this. The Wall Street Journal is pointing out that:
O Bush's plan won't do anything to address the problems of Social Security
O It'll add to the debt and be hard for conservatives to support
O The whole thing could be solved by removing the cap, which would only affect the top 6% of tax payers.
When the Wall Street Journal won't support a plan that would make millions for their own readers, well, that's not good for Bush. In fact, is that the rank odor of dead meat I detect coming from Bush's idea?
But wait, the Republicans do have the idea that they're going to try and sell as the solution to Social Security's money gap.
The White House favors a fundamental change in the method for calculating retirees' initial benefits -- adjusting them for inflation increases during the retirees' working life, instead of national wage growth, as is currently done. Since prices rise more slowly than wages, switching to a price index would by itself hold down Social Security's benefit costs enough to erase the program's long-term shortfall. But it would greatly reduce the size of future retirees' benefits, leaving them less able to keep pace with rising standards of living as retirees have traditionally been able to do.
How badly would it reduce those benefits? Badly enough that if price indexing had been used from the program's inception, the average benefit today would be... about $4,000 a year.
I can't wait to see how that one sells.