Wednesday, February 08, 2006

Bush Tries End Run On Social Security Privatization

Boy, these guys in the White House just don't give up on stuff even when 60% of the country is against.

Remember how the Bush Social Security Privatization/Bamboozlepalooza tour seemed to be permanently canceled last year?

Turns out not so much. Allan Sloan, Newsweek's Wall Street editor, has the story on the return of Social Security Privatization in today's Washington Post (via

If you read enough numbers, you never know what you'll find. Take President Bush and private Social Security accounts.

Last year, even though Bush talked endlessly about the supposed joys of private accounts, he never proposed a specific plan to Congress and never put privatization costs in the budget. But this year, with no fanfare whatsoever, Bush stuck a big Social Security privatization plan in the federal budget proposal, which he sent to Congress on Monday.

His plan would let people set up private accounts starting in 2010 and would divert more than $700 billion of Social Security tax revenues to pay for them over the first seven years.


Unlike Bush's generalized privatization talk of last year, we're now talking detailed numbers. On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion.

In the first year of private accounts, people would be allowed to divert up to 4 percent of their wages covered by Social Security into what Bush called "voluntary private accounts." The maximum contribution to such accounts would start at $1,100 annually and rise by $100 a year through 2016.

It's not clear how big a reduction in the basic benefit Social Security recipients would have to take in return for being able to set up these accounts, or precisely how the accounts would work.

Bush also wants to change the way Social Security benefits are calculated for most people by adopting so-called progressive indexing. Lower-income people would continue to have their Social Security benefits tied to wages, but the benefits paid to higher-paid people would be tied to inflation.

Wages have typically risen 1.1 percent a year more than inflation, so over time, that disparity would give lower-paid and higher-paid people essentially the same benefit. However, higher-paid workers would be paying substantially more into the system than lower-paid people would.

This means that although progressive indexing is an attractive idea from a social-justice point of view, it would reduce Social Security's political support by making it seem more like welfare than an earned benefit.

Bush is right, of course, when he says in his budget proposal that Social Security in its current form is unsustainable. But there are plenty of ways to fix it besides offering private accounts as a substitute for part of the basic benefit.

Bush's 2001 Social Security commission had members of both parties, but they had to agree in advance to support private accounts. Their report, which had some interesting ideas, went essentially nowhere.

What remains to be seen is whether this time around Bush follows through on forming a bipartisan commission and whether he can get credible Democrats to join it. Dropping numbers onto your opponents is a great way to stick your finger in their eye. But will it get the Social Security job done? That, my friends, is a whole other story.

Never say die on that Social Security Privatization movement, eh?

Fucking amazing.

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