If Bush's social security plan is passed as proposed then average income-earning middle-aged adults between 45 and 55 may get financially hosed. Let's forget the national debt burden that the switch to a "defined contribution" plan would entail (estimated by many experts at about one trillion dollars over ten years). The borrow and spend Republicans don't seem much concerned about the messes (fiscal or environmental) they will leave to future generations. I believe Democrats should challenge the practical realities of Bush's fiscal policies, instead of always whining about the ethics of those policies. Most folks don't vote based on ethical abstractions. They vote their own interests.
So boys and girls, let's do the math...
Under Bush's plan, workers under 55 (not guaranteed a full social security benefit) would be able to put up to 4% of their gross income into an investment fund. Presumably these funds would be restricted to certain mutual funds, index funds, bond funds, and other relatively conservative investments. Bush's initial proposal caps initial contributions at just over 1,000 per year, but this cap would presumably rise over time.
So lets say a worker who is 50 years old making a national average salary is forced into Bush's new social security program. And lets say they contribute the maximum they are able to over a fifteen year period (1,600.00 per year). And lets say they earn an average of 6% annually on their investments. How much will they have in their account at retirement?
The answer is: just a little under 39,000.00. This number is actually an overstatement because it is not adjusted for the income tax that must be paid when the money is dispersed.
Is this enough money to provide financial security to middle-aged folks as they reach retirement age? Of course not.
How does this amount compare with the social security distribution our hypothetical middle-aged worker would be entitled to?
First off, social security is a guaranteed income FOR LIFE. Some folks live a lot longer than others, but lets assume our hypothetical worker lives to age 77 (average American life expectancy). If they draw 1,200.00 per month from social security from age 65 to age 77, then the worker would draw more than 170,000.00 from social security, or MORE THAN FOUR TIMES MORE than they would earn through the Bush retirement account.
In addition to racking up larger Federal deficits, Bush's plan could send many middle-aged folks into premature poverty. This is the argument Democrats should be making to the American people.