Sunday, February 06, 2005

NYTimes: Bush Impairing His Credibility & Shredding US Fiscal Outlook

Excerpts from today's lead New York Times editorial on the President's Social Security ideas. Invest a few minutes to read it in its entirety here.

I agree. Let's drop this and move on to actual problems. Social Security is likely our country's least pressing concern in 2005.
"Read the Fine Print"

"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....

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....

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.)

Various proposals to strengthen the current system's solvency via modest tax increases and benefit cuts - without resorting to costly private accounts - could guarantee a government benefit that replaces about 30 percent of preretirement income on average. But for all his talk about "an open, candid review of the options," the president refuses to consider any plan that excludes private accounts or includes tax increases, no matter how small. His stance makes severe benefit cuts unavoidable....

And the much-touted promise that the private accounts could be passed on to one's heirs, as it turns out, is also less than it seems. That works entirely only if you die before you retire....

Mr. Bush is expending tremendous energy to sell his plan - daily impairing his own credibility and shredding whatever confidence remains in the country's fiscal outlook. Members of Congress would do him - and their constituents - a favor by reining him in and moving on to more pressing matters."

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