Thursday, February 03, 2005

Some details about privatizing

The Center on Budget and Policy Priorities has a helpful little cheat sheet based on what a "senior Administration official" presented as the bare-bones of the Bush plan to gut Social Security. Some of the things mentioned

  • The private accounts have a net-neutral effect on the solvency debate. This is actually misleading in itself because to fund the private accounts 4% of the 12.4% of payroll taxes, or roughly 1/3, would be diverted. For every three dollars, one dollar goes away. That actually increases the shortfall in the system.
  • The $750 billion estimate that they give as added debt is low-balling it. For the first 10 years that the plan is in effect, 2009-18, we add $1 trillion dollars to the national debt. For the next 10 years after that, we add another $3.5 trillion in debt. That's $4.5 trillion in debt over 20 years. To the extent that there is a shortfall in Social Security, it would actually be cheaper to just borrow money and pay it off over the next 75 years than to do this God-awful plan.
  • And for all the talk about "bankruptcy" the administration won't even speculate as to how to restore solvency. Bush said a lot of things were on the table, like raising the retirement age and means-testing for benefits. But none of that is politically viable. The only way they can do it is to cut benefits. First they'll have to cut benefits to cover the shortfall, then cut benefits some more since they are diverting a third of the money out of the system.
All told, this is a really crappy plan facing near universal opposition except from his lackeys. I really don't see how he can possibly get this through Congress in its present incarnation.


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