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March 21, 2005

A Look at Bush's "Private" Parts (of Social Security)

All right, so maybe George Dubya Bush's Social Security reform ain't perfect; but at least it's a step in the right direction. Or is it?

Not according to Casey Research (via the Mises blog). (Scroll down to "The Great Social Security Debate, Part II.")

Regular WWNK readers will know where we come down on this. True privatization sounds like a laudable aim to us. But is that really what the White House is offering? As with all politicians and their promises, the devil is in the fine print. When we examine that, we find that the reality isn’t quite so straightforward. For example, under the Administration’s proposal, the individual wouldn’t control his or her account; the government would keep and administer the money, deciding how to allocate resources and when to distribute profits. Now, due to the financial ignorance of so many, one could argue that there should be some bar against high-risk investments (the Chilean system does), but this setup forces us to rely on the government to administer our personal monies in our best interest. Talk about risk.

Worse still, the Bush plan specifies that upon retirement, workers would be returned only the amount that exceeded inflation-adjusted gains over 3 percent. The SSA hopefully projects a return of 4.6% above inflation; the Congressional Budget Office, less sanguine, thinks a 3.3% return is more realistic. Either way, the government gets to hang onto the first several percentage points of your profit; brokerage fees included. . . .

This sounds like just another confiscatory government scheme to us. Or as Peter Orszag—head of the Pew Charitable Trusts’ bipartisan Retirement Security Project—puts it, what this amounts to is a loan from the government, to be paid back upon retirement at an inflation-adjusted 3% interest rate. Even conservative Stephen Moore, author of the book Bullish on Bush, admits that this plan undermines the notion of an “ownership society.” However, the question is why the government should have the right to take back any profits from a “private” account at all.

Then there are issues of how to finance the existing Ponzi scheme while diverting money from it, whether to index future benefits to inflation or wages, etc. In short, don't buy the notion that the Bush plan actually increases freedom or provides a way out of Social Security. Would we expect anything less from the man who has grown government faster than any president since LBJ?

Posted by Mike Tennant at March 21, 2005 10:13 AM

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