[EDITOR’S NOTE] Generally, I don’t like web memes, but Jeanne at Cook Sister made an offer I couldn’t refuse – a music meme. Social Security – as important as it is - can get tedious and everyone needs a little joy to lighten the load of the times we live in. So check out Jeanne’s answers to the meme, here - and mine are in the first Comment.
In the interests of remaining calm enough for a good night’s sleep, Crabby Old Lady sat out the State of Union. But she read the transcript the next day.
Mr. Bush, who devoted the most time in his speech to Social Security, once again – as with the war in Iraq - used his powerful bully pulpit to try to scare everyone into submission.
Let Crabby be very clear about this: there is no “crisis.” Social Security is not going “bankrupt.” And we do not need to fix Social Security “permanently,” as the president stated. More importantly, no one can do that. No one predicted the stock market crash in 1929. No one predicted other, more recent recessions. No predicted the internet bubble. And no one predicted its puncture.
No one knows the future. Not even the president.
What we can do – and Crabby is waiting with baited breath for the Democrats to come up with their counter-plan – is make some tweaks and changes that will take up the slack for the foreseeable future, and let future Congresses tweak again as necessary.
That said, here is what a New York Times editorial correctly labeled Mr. Bush’s “vague and glossy” plan:
The President’s Social Security Plan
His basic idea is to allow workers younger than 55, starting in 2009, to voluntarily invest up to four percent of their Social Security payroll taxes (to an annual cap of $1,000) in private investment accounts. Gazing into his crystal ball, he predicted, “Your money will grow, over time, at a greater rate than anything the current system can deliver.”
He listed some “principles” for development of the plan:
- A conservative mix of bonds and stock funds
- Earnings not eaten up by hidden Wall Street fees
- Protection of investments from sudden market swings on even of retirement
- To be paid out over time as an addition to traditional Social Security benefits
He said all ideas to accomplish this are “on the table” except: “We must not jeopardize our economic strength by increasing payroll taxes.”
That’s the plan as Mr. Bush outlined it on Wednesday evening. Everything else he said, at length, is spin and propaganda, outright lies and lies by omission.
What the President Left Out
The biggest omission the president did not tell the country is that Social Security benefits will be reduced for workers who adopt the private account plan. He made it sound like that money would be paid out at retirement in addition to normal Social Security payments.
Crabby was surprised at the percentage the president would allow to be siphoned off into private accounts – four percent, twice what experts were guessing leading up to this speech, and nearly a third of the total payroll tax. That means, which Mr. Bush did not mention, even more borrowing will be needed to pay current benefits to retirees; even more added to our already astonomically high national debt.
Worse, the president’s plan will do absolutely nothing to solve the shortfall in Social Security, which at least presidential aides admit. Reporters spoke with White House officials about the plan prior to the speech:
“…asked Wednesday whether it would be fair to describe the proposed accounts as having ‘no effect whatsoever on the solvency’ of Social Security, a senior administration official said, ‘That’s a fair inference.’
- - Los Angeles Times, 3 February 2005
So as Crabby understands it, the president’s plan is to raid Social Security of nearly one-third of its revenue with no idea as to how he would make up the difference to ensure its future solvency. Maybe it’s hard for a person who’s never had to wonder where next month’s rent is coming from to concern himself with fiscal details.
Another big omission is the protection of the 23 percent of Social Security beneficiaries who are not retirees:
“There was no mention of what would happen to workers who become disabled, currerntly 16 percent of Social Security beneficiaries, or the minor children of workers who die, now 7 percent of beneficiaries…Nor was there discussion of whether spouses would have access to private accounts or what would happen in the case of divorce.”
- - The New York Times, 3 February 2005
The president did present one definitive detail, his idée fixe from the get-go of this issue: raising payroll taxes is off the table. And that’s just crazy or, more to the point, it’s reverse Robin Hood-ism – robbing the poor to pay the rich:
Crabby has said this before, but to reiterate: The current salary cap on which Social Security payroll taxes are levied is $90,000. Low- and middle-income workers, who never earn that much money, have always been taxed on all their salary. There is no reason not to remove the cap entirely. To do so is fair, equitable and would help avoid at least some of the otherwise required borrowing.
Dean Baker, co-director of the Center for Economic and Policy Research, understated the basic truth about Social Security privatization when he said,
“They hope people will think they will take on these accounts and after 40 years, they’ll have this huge windfall, but that won’t happen. I think they’re trying to confuse people.”
- - Washington Post, 3 February 2005
This president fooled us once by scaring us into Iraq. Don’t let him do it a second time by scaring us out of Social Security.
Tell the president and your Washington legislators what you want. You can do that at this website. Do it today and do it often. There is power in numbers.
...to be continued...
Social Security Privatization Series Index