Facts and myths about Bush’s plan for Social Security privatization

[IndianaGreen]

Another byproduct of Bush's "reform" of SS is that it will infuse new capital into the stock market, more money into the pockets of the capitalists at the expense of the workers.

Facts and myths about Bush’s plan for Social Security privatization
By Patrick Martin
3 February 2005

The centerpiece of the domestic policies outlined in Bush’s State of the Union speech Wednesday is the partial privatization of Social Security. While the details of the White House plan have not yet been finalized, the broad outlines include: (1) the diversion of Social Security payroll taxes to the creation of private investment accounts; (2) government borrowing to sustain current benefit payments (which would otherwise be paid for by the payroll taxes); and (3) sharp cuts in benefit payments for future retirees (with the claim that income from their private accounts will make up for it).

Bush and the congressional Republicans are selling the plan as an alternative to a fiscal crisis which they claim will force huge cuts in benefits or huge increases in payroll taxes when today’s young workers are approaching retirement. Various factions of the Republican Party differ over how much of the payroll tax should be diverted, how large the private accounts should be, and how severely future benefits should be cut, with the Wall Street Journal, the Cato Institute and other spokesmen for the extreme right seeking the largest possible accounts.

In a recent statement, Bush claimed, “The system will be in the red in 13 years, and in 2042 the system will be broke.” But if a 27 percent shortfall means the system is broke, then what of the federal government budget which Bush will present later this month? The federal government will run a deficit of something close to the level cited by Bush as dangerous—not in 2042 but in 2005! (The projected $427 billion deficit is 21 percent of a $2 trillion budget. Add an expected $100 billion more for war in Iraq and Afghanistan, not included in the budget, and the deficit reaches 26 percent).

Bush blurted out the real content of his proposed “reform” at his economic summit in December, when he remarked: “The question is whether or not our society has got the will necessary to adjust from a defined benefit plan to a defined contribution plan.” In other words, for all the rhetoric about protecting the elderly, the essence of his policy is to shift the American population from a federal pension plan paying guaranteed benefits to a variant of the 401(k) plans which make benefits hostage to the ups and downs of the financial markets.

http://www.wsws.org/articles/2005/feb2005/socs-f03.shtml