The Perils of Bush's Social Security Plan
Bush has proposed a drastic restructuring of Social Security in order to “save”
it. But he’s proposing radical surgery on a patient that has
at worst a sniffle. Social Security is the best source of
economic security for all America’s working families. Some
minor reforms could make this highly successful program even better, but carving
it up into private accounts isn’t one of them. Bush’s
proposal will only make the rich richer and the rest of us
Social Security isn't going bankrupt.
In fact, with the baby boomers all retired and everybody living longer,
both workers and retirees will have more in real income in 2030 and beyond than
they do today. The so-called crisis is a phony one,
produced by Wall Street interests hoping for huge profits from new private
accounts, fed by politicians eager for a few more votes, and promulgated by a
media obsessed with sound bites and scandal.
often told that Social Security will run short of money by 2037, as if that were
a fact. But it's a forecast, based on the assumption that the
American economy of the 21st century will grow more slowly than it did during
the Great Depression of the 1930s! This worst-case
scenario is highly unlikely. In every decade for the
past 50 years, our economic growth averaged 3.5% annually.
According to the Social Security trustees, if the long term
historical average holds for the next century, then Social Security will be able
to pay full benefits through 2075 and beyond with no reforms
whatsoever. If economic growth and technological innovation
do permanently slow down, there are simple and risk-free ways to keep Social
Security fully financed indefinitely. One of the easiest
would be to eliminate the cap on taxable earnings. Currently,
Social Security taxes aren’t collected on earnings above about $76,000, meaning
that the wealthiest Americans actually pay the least into the
replace Social Security's retirement system with private investment accounts
would replace guarantees to retired workers with guaranteed government handouts
to Wall Street. Schemes to privatize Social Security share
five major problems:
Stock market fantasies - Privatizers claim Social Security will run out of money based on gloomy economic forecasts, while trying to convince us we'll all become millionaires playing the stock market. If our economy goes into a permanent stall, returns on investments will plummet. If our economy does stay strong, some will be lucky enough to retire when the market is up, others will lose their shirts when the market takes a nosedive – but then there won’t have been any need to “fix” Social Security.
Cutting core benefits – The base Social Security retirement benefit, which is now guaranteed and increased annually for inflation, would have to be cut under Bush’s plan, by an amount ranging from 25% to 54%, according to most economists.
Ignoring transition costs – If 2% of workers' pay that now goes to Social Security went instead into private accounts, money for the benefits of today's retirees, widows, orphans, and disabled workers would have to come from somewhere else. Taxpayers would have to fork over an extra $1 trillion over the next 10 years.
Ignoring higher administration costs – Keeping track of everyone's individual investments, and paying all the brokerage and investment fees would cost far more than administering Social Security. That's money for Wall Street, not workers' retirement.
The rich will get
richer, the poor will get poorer – Those who make
the least during their working lives would lose the most with
privatization. Social Security benefits replace a higher
percentage of pre-retirement wages for low income workers than for high income
workers. Private investments are the opposite – the more
you invest, the greater the return. Under privatization,
guaranteed benefits would be cut drastically for everyone, but moderate and
low income workers would have built up much smaller personal accounts than the
rich. Women, who generally make less and live longer, would
be especially likely to face old age in poverty.