Bush's Social Security Sleight of Hand
By Allan Sloan
The Washington Post
Wednesday 08 February 2006
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.
If this comes as a surprise to you, have no fear. You're not
alone. Bush didn't pitch private Social Security accounts in his State
of the Union message last week.
First, he drew a mocking standing ovation from Democrats by saying
that "Congress did not act last year on my proposal to save Social
Security," even though, as I said, he'd never submitted specific
legislation.
Then he seemed to be kicking the Social Security problem a few
years down the road in typical Washington fashion when he asked
Congress "to join me in creating a commission to examine the full
impact of baby boom retirements on Social Security, Medicare and
Medicaid," adding that the commission would be bipartisan "and offer
bipartisan solutions."
But anyone who thought that Bush would wait for bipartisanship to
deal with Social Security was wrong. Instead, he stuck his own
privatization proposals into his proposed budget.
"The Democrats were laughing all the way to the funeral of Social
Security modernization," White House spokesman Trent Duffy told me in
an interview Tuesday, but "the president still cares deeply about
this. " Duffy asserted that Bush would have been remiss not to include
in the budget the cost of something that he feels so strongly about,
and he seemed surprised at my surprise that Social Security
privatization had been written into the budget without any advance
fanfare.
Duffy said privatization costs were included in the midyear budget
update that the Office of Management and Budget released last July 30,
so it was logical for them to be in the 2007 budget proposals. But I
sure didn't see this coming - and I wonder how many people outside of
the White House did.
Nevertheless, it's here. 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.
--
Gary Denton
http://www.apollocon.org June 23-25, 2006
Odds&Ends - http://elemming.blogspot.com
"If the President has the 'inherent authority' to eavesdrop on
American citizens without a warrant, imprison American citizens on his
own declaration, kidnap and torture, then what can't he do?" - Al Gore
Easter Lemming Liberal News -http://elemming2.blogspot.com
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