Reality...what a concept
Quote of note:
When asked what would happen to the people who would not have enough income to avoid poverty, the administration official said, "I'm not sure if I'm understanding your question."
The more we learn, the worse it gets.
Last Wednesday, as President Bush prepped for his State of the Union address, a White House official gave reporters a background briefing on some of the details of Mr. Bush's Social Security privatization plan. Almost point for point, whatever the president said that sounded good sounded bad when the details were filled in.
For instance, Mr. Bush said, "Personal accounts are a better deal," because "your money will grow, over time, at a greater rate than anything the current system can deliver." But the privatized system actually contains hidden costs that could leave retirees with less. Your Social Security benefit would be reduced, dollar for dollar, by the amount of money you deposit into your private account and an additional charge amounting to 3 percent plus the rate of inflation. All the money that is drained off would presumably go to pay for the enormous upfront government borrowing - $4.5 trillion over the next 20 years - that privatization would require.
That means people whose private accounts steadily earned three percentage points over inflation throughout their working lives would wind up with exactly what they would have gotten if Social Security remained untouched. Anyone who earned less than that would end up with less than is offered by the current system. When asked what would happen to the people who would not have enough income to avoid poverty, the administration official said, "I'm not sure if I'm understanding your question."
The benefit cut is only the beginning. There is still the problem of strengthening Social Security's finances. On its own, establishing private accounts does nothing to solve the long-term shortfall in the system. The president alluded to this fact when he said, "We must pass reforms that solve the financial problems of Social Security." He dutifully listed various benefit cuts that would do the trick, without taking the politically risky step of endorsing any of them.
Neither the president nor his aides have been willing to acknowledge the extent of benefit cuts that would be needed. And no wonder: All in all, they would leave the average worker with a government benefit worth only about 10 percent of his or her preretirement earnings. (Currently, Social Security replaces about 35 percent, on average.)
