Bush's Secret Plan To 'Reform' Social Security

[Nbadan]

The Bush plan to "privatize" Social Security depends on funding the transition costs by confiscating excess returns from new private accounts.

That's right. They intend to calculate what rate of return you need to achieve to maintain the basic level of guaranteed benefits and if your account outperforms that rate of return, they will simply take it.

Who says? The White House says so!

http://www.slate.com/id/2096337

Ron Sukind in Slate: The Free-lunch Bunch (http://www.slate.com/id/2096337)

The Bush team's secret plan to "reform" Social Security.



During the 2000 campaign, candidate George W. Bush seemed particularly confident about his ability to pay for Social Security reform. Despite independent estimates that creating the kind of "voluntarily" private accounts he envisioned could cost more than $1 trillion, Bush consistently took the position that he could reform Social Security for free, without undermining promises to baby boomers anticipating retirement over the next several decades.

Why was Bush so sure of himself? According to documents unearthed yesterday from the trove of 19,000 files given to me by former Treasury Secretary Paul O'Neill, and a bit of additional probing, candidate Bush and later President Bush believed in the "Lindsey Plan." These documents show us what the president thought about Social Security reform at the only moment over the past three years—the fall of 2001—when he was fully engaged with this issue.

Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.


More...

So if I get luck and my private SS account makes, ummm...10% on a good year, the government can take anything over 2%, but if the account loses money I'm SOL. Sounds fair to me.

:devil

[Marcus Bryant]

Assuming that this is even accurate, which of course is a bit of a stretch, what's the problem? Do you not understand how the current SS system works?

If you don't like the prospect of being cheated out of the use and ownership of your earnings which go into the SS system, how exactly does the current system differ on that count?

[exstatic]

Assuming that this is even accurate, which of course is a bit of a stretch, what's the problem?

I don't even know where to start. You have all of the risks of the market and none of the rewards for actually beating or outperforming it?

[Marcus Bryant]

As it stands anyone in their 20s and 30s faces the prospect of a real negative return from the current SS system. So basically current workers are already on track to lose money in SS.

At least with some type of privatization you would regain ownership of some of your earnings.

Also, if you have a problem with the government penalizing you when you are successful yet requiring you to bear the risk for your decisions, how does that differ from what we currently face in our lives? Surely you would agree with Bush on the need to lessen the steepness of the progressive income tax.

Not that I would find that alleged proposal, as described, all that great, but the alternative (doing nothing) isn't exactly that appealing (higher payroll tax rates and negative returns).

I find that article disingenuous because if anyone did own an account which they managed for themselves then any attempt to confiscate as much as is claimed would not be politically possible.

[exstatic]

Surely you would agree with Bush on the need to lessen the steepness of the progressive income tax.

Actually, I'm a no loopholes flat taxer.

[Marcus Bryant]

Good. Then you should welcome attempts to regain ownership of some of your earnings which are taxed away under the current SS system.

Basically this partial privatization is going to be sold as being just like an IRA. There is no way any politician could get away with the degree of taxation which danny suggests.

Also, a re-read of the article posted shows that what was allegedly discussed could easily have meant simply taxing some of the positive returns from those accounts, not simply taking them away as danny stated:


Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.


All taxes are 'confiscation', if you will. That highlighted phrase could easily mean taxing away a portion of the returns, much like we are taxed on other forms of investment returns.

Personally, I'd prefer to see SS transformed into a welfare program for needy seniors. That way, if someone needs the assistance, it will be there. Yes, it would be paid for by a payroll tax but at a much lower rate. SS was created in another era, one in which most people did not live that long past their retirement and also one in which most people were poor in life and death. Today is quite a different story, with most Americans enjoying a middle class lifestyle, owning their own home, planning for their own retirement, and living decades past their retirement. A scant 20 years ago only about 20% of Americans had any experience investing, now it's somewhere around 70%.

As I understand the proposed SS reforms, current workers would be given an option to invest in some fairly safe securities. Basically someone could put their earnings in a savings account. The difference between the current system and that one would be that the worker would actually own that money and actually would enjoy a return exceeding what they are likely to attain under the current system.

I think the ownership aspect is key. Your 'right' in SS is pretty much as long as you live and as long as your survivors can enjoy a death benefit. Once that period passes then that's it. If you own the money then it's yours. Period.

If you asked most people today what they think Social Security is meant to accomplish they would tell you to provide an income for those who need it in retirement. Well, why not make it so and why not, for a change, allow more American families to own more of their earnings and control those earnings as they see fit?

You'd still have the income guarantee for those who need it which is what the lib-left wants and you'd have the greater freedom which the right wants.

At least Bush has the nuts to actually bring this issue up and try to get something done. He could easily do what presidents before him have done and simply pass the buck on down the line.

[JackLalanne]

If social security was enough I wouldn't have to be working at age 90 selling these damn juicers!!

http://www.jacklalanne.com/anijack7.gif

But I can still kick your young asses.