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Sunday, February 20, 2005

Social Security has an ironic name

First a ReCap:

Ok, so the president has said he wants to revamp SS. He says he's listening to all the ideas available, but as we know he will eventually get a proposal into congress that includes carved-out accounts: ie, diverting some of the worker's FICA into an account that is legally considered his property, and which he can use to invest in stocks, junk bonds, et cetera. The theory behind this is that the higher returns will allow us to cut benefits, which will be a Better Deal, in that SS will no longer go bankrupt. The reason that this might work is that generally, stocks perform better than the bonds that SS is currently invested in; switching to stocks will create more money without raising taxes.

This could also be accomplished by investing the SS fund in stocks without creating personal accounts. However, that would put the USGOV in the business of stock speculation, and the entire planet would soon be destroyed in a horrible chain of events.

Ok... But SS is fine for another 40 years, at least. Granted that it's better to deal with problems sooner than later, there are more pressing concerns. Medicare will bankrupt the USGOV in *looks at his watch* 10 years or so. So why tinker with SS?

Yes, it is the root cause of our Welfare State today, but dismantling it wouldn't be a huge gain. And it would be dismantled. When workers see their money making profits, they will want more and more of the FICA redirected into private accounts. Then, one day, they will be abolished in favor of 401ks and everyone will be happy, except orphans and the disabled. But...

SS in not the issue. Enacting the president's plan will have one major side effect that is absolutely essential to his longer term goals. The SS Fund will be out of the control of the USGOV. The surplus, previously used to buy T-bills, will go to the stock market (fueling another boom, BTW). The deficits we are now running will be impossible. No one else will buy enough bonds to make up the shortfall.

The president will, of course, veto any tax increases, assuming the crisis hits in the next 4 years or we elect one of his posse. Spending will have to be cut- and in a situation like that, the prez has huge control over what will be cut. I imagine farm subsidies and things of that nature, pork, and the national endowment for the arts will be first. If we can withdraw most troops from Iraq then, that would save a lot of bling. Of course, GWB is unpredictable.

And let me say, pork lard is the grease that keeps the government running. Anyways, that's the gist. Spending cuts and economic growth- not shoring up SS.

For a running commentary from a well-educated leftie, visit talkingpoints memo. It's perty good.


Anonymous Anonymous said...

There are some aspects of the Prez's proposal which you have neglected. The ability of a person to will his personal acct to survivors would be of greatest benefit to the poorest Americans, those without other wealth. SS as now constituted is unfair to minorities who tend to have a shorter life span. SS survivors benefits are very low.

Govt bonds yield about 1.5%. Over any 20 yr period for last 100 yrs. stocks yield about 6%. Anything that will help gradually put ss into a real saving for your own retirement mode is good.

Saying another problem is worse is the classic way to get NOTHING done.

3:30 PM  

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