Social Security & Medicare Notes

Bush plans Private accounts, lower benefits for Social Security

Bush promises to keep pushing his reform of Social Security. I guess he was answering the unstated question of whether his poor poll results resulting from his 60-Days, 60-Stops Banboozlepalooza will make him quit or back off.

An important statement he made tonight is that people in the future will get at least as much as current beneificiaries. That means a benefit cut for future beneficiaries, since the benefits will begin replacing less and less of earnings lost because of retirement. That is to say, wages will increase but the benefits will remain at the level of today. Right now most retirees get about 40% of the wages they paid taxes on and the benefits rise as a result of increased wages. Then after retirement the wages are increased based on the Consumer Price Index (CPI) rather than the increase in wages. The average wage increase over time has historically been about twice the rate of the increase in the CPI.

He would also give lower benefits to higher income workers. That is, it would be "means-based." These two items would more than eliminate any projected deficit.

Of course, he still demands that private accounts be included, so that there is some actual ownership involved. What he doesn't say here is that this can only be done by borrowing more to pay benefits to make up for the amounts diverted to the private accounts. That means that his private accounts will add to the federal deficit that he and the Congress have already let get totally out of control.

The economic effects of that additional borrowing is very likely to slow our economy, either through higher interest rates or increased inflation - or both.

Means-testing Social Security will turn Social Security into a pure welfare program. That will guarantee political problems for maintaining benefit levels for beneficiaries in the future, as the original planners setting up Social Security recognized. When the only issue is keeping retirees out of poverty, it becomes easier to lower the measure of poverty than to increase the level of payments. The Texas Legislature proved that two years ago when it cut thousands of poor people and children off Medicaid just to save money and not raise taxes.

Bush offered nothing new, but he threw out the statement "We [the Republicans] are the party of ideas. Where are the Democratic Party ideas?" ABC TV reported that some Democratic person had already stated that private accounts were off the table. Period.

When he was asked if a plan was presented that guaranteed solvency of Social Security but did not include private accounts, would he accept that? Bush answered no. He wants private accounts even though they do nothing to improve the program! Then he promised people who would go for private accounts would do better than under the current system. Of course, he offered no guarantee of that, and the history in the United Kingdom and Chile has been that this simply hasn't happened for large numbers of people. The private accounts are pure unreasoned ideology on Bush's part no matter who gets hurt.

The Associated Press has a news report on the Press Conference already. MSNBC also has their report.

posted by Richard @ 11:15 PM