It’s hard to ignore the fact that Social Security has been the most successful program in U.S. history. Though President Bush is calling it a crisis in order to gain support for his privatization plan, the problems that face Social Security require careful consideration of the existing program rather than radical changes to destroy it. There is a problem on how to prepare for the influx of baby boomers about to enter the Social Security program, as well as coping with a population that lives longer and has less births. But the Bush Administration’s plan to privatize accounts will only make the situation worse. Most analysts suggest alternative solutions can strengthen Social Security so that people will actually receive the benefits they have already paid for and earned.
What Privatization Would Mean For You
While the Bush Administration has been actively promoting their plan for private accounts, they have been very vague in explaining what it means and how it will actually help. Bush has said people should be in control of their own money to plan for retirement, and that private accounts would be voluntary. Bush has also said that his plan would affect people aged 55 and younger, while current retirees would still receive their SS benefits.
Here are the details of Bush's privatization plan that are finally coming out:
* The plan will call for at least $2 trillion of money we don’t have—money the government will have to borrow from foreign countries like China or Japan.
* Whether or not you “volunteer” for private accounts, your benefits will be cut by 40 percent.
* For every $1 you’ve gained in your private account upon retiring, 50 cents will be taken away for taxes.
* The government will determine which private investment companies—opening the door to more corruption on Wall Street.
* Administrative costs for private investments will be 12-14 percent; where as the administrative costs for Social Security is less than 1 percent. Needless to say, private investment firms will make billions and billions of dollars in fees to run working America’s private accounts.
Initially, at least, we'd have to pay for two Social Security systems at the same time: today's program for current beneficiaries and the privatized system. The added costs would most likely require:
* Raising the retirement age to 70 or older;
* Deep cuts in guaranteed benefits;
* Cutting or eliminating cost-of-living adjustments; or
* Creating huge new federal deficits
Of course, the idea with private accounts is that whatever amount the plan will take away from you, you might be able to gain back in investments. As the American Progress Action Fund put it, Bush’s plan can be summed up by
saying, “Let me have 20 bucks, I’ll give you 10 back in return, and you might be able to make up the difference and possibly more at the track.”
Rather than finding a sensible way to ensure Social Security’s solvency, the White House—which wasted a $5 trillion budget surplus to provide tax cuts for the wealthy—wants to cut benefits by one third over the next decade and force Americans to risk the rest of their retirement income on Wall Street. An analysis by the Congressional Budget Office shows that total retirement benefits under private accounts would add up to be less than what people receive under the present program.
The only guarantee in President’s Bush’s scheme is that billions and billions of taxpayer dollars will be turned out to investment firms and to the waste and corruption that is a part of the Wall Street system. So not only would we have to gamble on our future retirement, but we would open up the system to abuse.
We need the voices of working America to step up and ask tough questions on this critical issue. Force the Bush Administration to hear your concerns. Let’s strengthen the most successful program in America’s history, not destroy it.