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Published: Tuesday, 3/22/2005

Bush's Social Security plan DOA

BY KENDALL F. DOWNS

DEAD On Arrival. Kaput. Ain't happening. No way, Jose. In your dreams. Fat chance.

No matter how you say it, the result's the same. President Bush's traveling road show designed to ramp up support for his "plan" to shore up Social Security has been a dud and the idea of private accounts for younger workers has no more future than a 16-seed in the NCAA Tournament.

Why? Well, because there is no plan. For the most part, his stump speech on Social Security can be boiled down to: There's a problem and I don't care how we fix it as long as private accounts are part of the solution.

I suppose the advantage to having a non-plan is that you can't be held accountable for specifics you don't have. And you can displace blame (onto Democratic obstructionism or Republican lack of will, for example) if Congress fails to come up with a real plan, while claiming credit if something actually happens (You know, "Following my lead, Congress has " etc., etc.).

Neat trick, but the President's not alone. In fact, Democrats are doing him one better because they do have a plan, which is to not have a plan and, instead, to offer vague prescriptions about tweaking the system.

Now, don't get me wrong; unless some action is taken, Social Security is a time bomb set to explode twice in the not-too-distant future. The first, and smaller, blast will be in 2018 when its projected income falls below its promised benefits and the federal government has to begin paying back the trillions it "borrowed" from the system. The really big bang, however, wouldn't be heard until sometime between 2042 and 2052, when all the "borrowed" trillions have been paid back and we find that even if it immediately pays out to retirees every dime that comes in from workers it still can only cover about 75 percent of promised benefits.

So, there's a real problem out there, and the President deserves credit for saying we have to do something about it. But the personal accounts idea, enticing as it is to some young workers, just isn't going to fly.

In the first place, drumming up support for personal accounts requires marginalizing the opposition of older and retired workers - the country's most politically active age group. The current approach of dismissing them with the promise, "don't worry, you'll get yours," has actually proved to be counterproductive. That tactic assumes older people don't care about anyone but themselves when, in reality, they tend to be very concerned about the future welfare of their children and grandchildren.

Second, personal accounts make no sense for middle-aged workers because contributions to those accounts, according to the White House, would begin at $1,000 per year and phase in over 26 years to a maximum annual contribution of $3,600, meaning middle-aged workers would reap little benefit.

In addition - and younger people aren't going to want to hear this - personal accounts make little practical sense for the vast majority of very young workers because, all too often, they can't manage a bank account, let alone an investment portfolio. Do you really want to put 18-year-olds in charge of investing for their retirement?

And personal accounts make no fiscal sense for the government because the transition is likely to cost several trillion dollars, over and above the trillions the government is going to have to find to pay back money borrowed from Social Security over the years. Right now, the federal government owes Social Security (that's you and me, folks) $1.8 trillion. In 10 years, that debt is expected to grow to $4.4 trillion.

In what alternate reality is the solution to this multitrillion-dollar shortfall that we create trillions in additional debt?

Nobody is saying what would happen to the people who, inevitably, make poor choices and lose the money they've invested. Neither is anyone taking into account what would happen to all retirement investments in the event of a severe economic downturn. Democrats are almost universally united against personal accounts, while many Republicans are no more than lukewarm.

The issue is a loser for Mr. Bush in the polls, where 58 percent say the more they hear about his "plan," the less they like it.

Dead? You can poke this one with a stick.



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