Good column on proposed S.S. reform

Excellent column that points out the many holes in Bush's supposed "reform". Funny that based on the economic projections Bush uses for his budget there won't ever be a shortfall, but apparently he uses different economic projections for his social security claims.

http://www.usnews.com/usnews/issue/050131/opinion/31edit.htm

"...In other words, there is no current financial crisis in the program. So, what's with all the hand-wringing? Well, if you make pessimistic predictions about economic growth, immigration, and wage inflation, the projected revenues may not be enough to pay benefits. The Social Security actuaries, for instance, project that growth will average only 1.6 percent after 2010, about half the rate we have enjoyed in the past century. But if the economy grows at anywhere near the levels that Bush's own budget experts project, the surplus, in effect, would never run out. And more-optimistic forecasts than those of the Social Security actuaries are supported by the recent history of economic and demographic trends."

<snip>

"President Bush has a different answer to all of the above. In pursuit of his "ownership society," he wants to move Social Security toward "greater individual opportunity, risk, and reward" by allowing individuals to carve themselves private investment accounts out of Social Security payroll taxes, much like a 401(k) plan. This raises a whole host of problems. It discriminates against poorer workers, for one thing. Why? Because the lower your income, the less you have to invest, and the smaller your return will be. The Bush plan offers nothing close to the financial security of the existing program. Then there's this: Are individual investors sophisticated enough to match the higher returns now being forecast? At least 10 studies analyzed by the Securities and Exchange Commission indicate a disturbing level of financial illiteracy. Only 12 percent of the investors studied could distinguish between a load and a no-load mutual fund; only 14 percent understood the difference between a growth stock and an income stock; only 38 percent knew that when interest rates rise, bond prices fall; almost half somehow believed that diversification guarantees that their portfolio would not suffer if the market dropped; and 40 percent thought that the trust fund's operating costs would not be deducted from their investment return."

<snip>

"Furthermore, historical stock-market returns are not a guide for future performance. A lot depends on when you buy or sell, especially when America faces not only dramatic fiscal problems but a threat to profit margins in growing global competition, particularly from India and China. If someone retires after the market dives, he or she could lose a good chunk of retirement savings. The market, after all, fell by 45 percent in real terms between 1968 and 1978--never mind the bust between 2000 and 2002. Individuals would be glad to pocket gains, but if millions of retirees suffered dramatic losses, there would be enormous political pressure to come to their rescue. We would very likely end up privatizing gains and socializing the losses."

<snip>

"Of course, the idea of an "ownership society" is to change the relationship of Americans to their government so they look less to Washington than to themselves (and, just maybe, vote more Republican). No doubt some Americans could build savings and more wealth and have a nest egg for retirement. No doubt there is value in savings and self-reliance, in making private investment decisions, planning ahead, and increasing distance from the government. But there are other values in the very title of the program--Social Security. "Social" surely implies a contract to help manage poverty among the old and to know that our society provides a minimum income for all of our fellow citizens in their retirement years. And "security" means buffering the harshness and cruelty of the markets so that the well-being of the elderly is not dependent on shrewd stock picks and hot mutual funds that enrich some but fail the very people who need Social Security benefits the most.

Privatization thus gets things upside down. Social Security was not meant to re-create the free market; it was intended to insure against the vagaries and cruelties of the market and to permit Americans to count on the promise that the next generation will take care of them in their old age."

also understood the situation and were allow to call Bush and the GOP liars when they lie.

This is the best analysis of the so-called Social Security "crisis" that I've read thus far. Lots of very pertinent and valuable information in the article.

For shameless self-promotion! :)