It really is mourning in America when President Bush seeks to sunset the Social Security system workers rely on for a measure of dignity in life?s twilight. New political capital is to be spent to create his legacy to ostensibly preserve benefits for younger workers.
Admittedly, the president campaigned openly on his desire to ?reform? the Social Security system enacted 70 years ago as the New Deal response to the human tragedy caused by the Great Depression. In fact, Bush also campaigned four years ago on the same concept to allow (actually force) workers to invest a portion of their Social Security taxes in a private investment account they will somehow ?own.?
His plan is superficially attractive. As long as the stock market isn?t crashing the idea ekes out a majority in polls. But the catch is that even today after four years in the White House, there is no Bush Social Security Bill ? just a vague concept so he can?t be pinned down on details.
To avoid the political wrath of older voters, Bush always declared there would be no benefit changes for those already receiving Social Security checks, or for persons near retirement age (presumably age 55 and up).
But until the specifics are unveiled, taking into account the swollen federal budget deficit, nothing can be certain ? especially the status of the annual Cost of Living Adjustment. Remember how long some people live after retirement.
In a late November New York Times/CBS NEWS Poll, 49% thought private accounts were a ?good idea? while 45% said ?bad idea.? But imagine the polls if there was an actual Bush bill in Congress to reveal the nitty-gritty.
To put some flesh on the bare bones of investment accounts, recall some fundamental decisions made by a Social Security Commission Bush handpicked over three years ago. This so-called bipartisan panel consisted entirely of persons who agreed in advance that private accounts were the solution to a long- range funding problem. As mandated by Bush, it refused to consider any increase in Social Security taxes in any form to cover baby boomer retirees down the road.
Even so, the Bush Commission failed to come up with a recommendation, instead issuing three plans–apparently so critics couldn?t zero in on a single proposal. But recall some key conclusions reached by the stacked deck commission, the fine print Bush never mentions.
Young workers beware of serious restrictions on your so-called ?personal fund,? the Bush sugarplum vision dancing in your head:
You can never touch one penny of your individual account (whatever that means) until you reach retirement age and retire. Chaos results if millions of workers can tap their personal fund—and then are unable to repay. Hey! The home mortgage is foreclosed! Need a bundle of cash for the cancer operation? Forget it!
Think you?re going to pay off your kids? college loans with a pot of gold when you retire? How about the world cruise you could never afford? Forget it! Uncle Sam isn?t about to permit five or ten million retirees to squander their investment accounts and then apply for welfare.
Hey! Have visions of playing the stock market, investing heavily in risky hedge funds to make a financial killing? Don?t kid yourself! The Bush administration won?t allow you to buy stocks and bonds willy-nilly and lose your shirt.
No bare cupboard for future retirees because it will be mandatory that your personal account essentially be packages of stocks and bonds managed by a prudent private investment firm ? but you guessed it – Bush corporate political campaign contributors on Wall Street come in for a big payday somewhere along the line.
Since private accounts for the entire U.S. workforce would generate a huge sum of money, even ?responsible management fees? for these bond and stock index funds will rake in billions of dollars in profits. Hey, these little fees add up, especially if untaxed under new Bush tax reform proposals!
No need to dwell on the grossly inflated net rate of investment return asserted by President Bush to conceal steep cuts in future guaranteed Social Security benefits ? cuts mounting to 40%.
When workers retire, their private accounts must purchase an annuity (more fees) paid out monthly based on life expectancy, inflation projections and total funds at the time. Pray the stock market is up and not down. The Bush investment accounts only transfer risk from the federal government to individual workers. This, when both blue- and white-collar jobs are threatened by globalization and outsourcing.
More details. When husbands and wives divorce, their private investment account is then split evenly?so better limit the number of spouses.
Hey! An attractive feature for the more affluent wage earner is that the individual account scheme eliminates the progressivity of current Social Security benefits which give a helping hand to persons with lower earnings.
A pencil and paper reveals the money invested in a private account by many wage earners ? be it two percentage points or four percentage points of FICA taxes–doesn?t amount to much. Without explaining why, the Bush Commission proposed that new Social Security benefits be at least equal to the poverty level. Hey, you don?t need to be a rocket scientist to figure out why!
Finally, the Bush Commission never spelled out what would happen to a major component of the existing Social Security system, the Disability and Survivors Benefits. When pressed on the issue, it conceded this crucial aspect of employee security must be financed elsewhere. It is obvious that younger deceased workers would not leave enough money in a personal account for their families to live on, nor could young injured workers sustain themselves.
Hey, the devil is in all these details!
President Bush would like nothing better than to have the problem of where to find at least $1.4 trillion to finance the transition cost of switching to his risky scheme be the only Social Security issue debated by Congress. But the public must be informed about the danger of buying a benefits pig in a poke.
Ron Cohen writes for the Gopher Retiree, the publication of the Minnesota State Retiree Council, AFL-CIO.