Sunday, July 03, 2005

Private accounts are far from dead!

Christian Science Monitor June 27, 2005 describes the new effort by Republican ideologues to carve out private accounts to replace Social Security.

The new idea redesignates the treasury bonds already held by the Social Security Trust fund to specific named accounts. Taxpayers could then cash in those bonds and purchase other investment in their private accounts. Since those bonds have already been designated to pay benefits for retirees up until 2041, that means that Social Security benefits will have to be sharply slashed in the near future.

The cost of administration of the current system is less than 1% of benefits paid out per year, but the private accounts would sharply increase the administrative costs. One estimate is that an additional 100,000 federal employees would have to be hired to deal with the private accounts. This is even before the additional costs of buying and selling investments is included.

Since this plan sharply increases currentcosts to the system while redirecting funds in the current trust fund away from paying benefits in the near future, it will require an increase in taxes or sharply reduced benefits for all beneficiaries a lot sooner than even the worst-case projections using the most conservative assumptions. No one comes out better from this plan except the wall street brokers and the insurance companies who handle the investments.

If you are having trouble understanding these various proposals being thrown out by the enemies of Social Security, I strongly suggest that you go to the right hand column in this news magazine and click through the book entitled "The Plot against Social Security: How the Bush Administration Is Endangering Our Financial Future." The author, Michael A. Hiltzik, is a financial columnist for the Los Angeles Times. He has the training to understand the issues and the writing ability necessary to explain them to people without his background.


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