The 2 Trillion Dollar Travesty

The Progress Report

SOCIAL SECURITY
The 2 Trillion Dollar Travesty

President Bush and his cronies in Congress -- in pursuit of a radical
right-wing agenda that is anything but conservative -- are working a
Social Security privatization scheme that would add trillions to the
national debt, cut retirement benefits and raise taxes
(http://www.nytimes.com/2004/11/28/politics/28secure.html?ei=5094&en=cd5a720c6da1c654&hp=&ex=1101704400&partner=homepage&pagewanted=print&position=)
. It is all part and parcel of the president's plan to cut guaranteed
Social Security benefits in favor of risky privatized accounts. Under
the current system, the payroll tax collected from today's workers goes
to benefits for people who are already retired. Bush seeks to divert
some of that money into privatized accounts for workers who won't retire
for years, which won't leave enough money to pay today's retirees. Even
Joshua Bolton, one of Bush's top economic advisors, acknowledges that
the shortfall, which could exceed $2 trillion over 10 years, would
likely "require additional borrowing." This would significantly increase the
national debt, which already stands at $7.5 trillion. (The Bush
administration managed to add $413 billion last year alone). Meanwhile, Bush
allies like Rep. Jim Kolbe (R-AZ) -- seeking to reduce the amount of
borrowing to around $800 billion -- are backing significant Social
Security benefit cuts and tax increases to off-set the cost of the
administration's privatization scheme. (For all the details of the costs of Social
Security privatization, read this paper
(http://www.americanprogress.org/atf/cf/%7bE9245FE4-9A2B-43C7-A521-5D6FF2E06E03%7d/socialsecurityreport.pdf)
.)

IGNORING THE PRICE TAG: The administration and its congressional allies
have come up with a clever way to avoid dealing with the financial
consequences of Social Security privatization: Ignore them
(http://www.latimes.com/news/nationworld/nation/la-na-socsec28nov28,1,33658.story?coll=la-headlines-nation)
. Despite its potential $2 trillion price tag over 10 years -- and the
president's insistence that it is a top priority -- top conservatives
in Congress are considering keeping the costs of privatization "out of
the five- and 10-year deficit projection that Congress looks at when it
writes the annual budget."

NO PROBLEMS WITH SOCIAL SECURITY FOR THE NEXT 48 YEARS: There is a
dirty little secret in Washington that the Bush administration doesn't want
you to know about: Social Security is in pretty good shape. In fact, "
Social Security is more financially sound today than it has been
throughout most of its 69-year history
(http://www.cepr.net/publications/facts_social_security.htm) ."
According to the non-partisan Congressional Budget Office, without any changes
at all, the Social Security program can pay all benefits through at
least 2052.

TAX CUTS FOR TOP 1 PERCENT EXCEEDS COST OF FIXING SOCIAL SECURITY FOR
75 YEARS: During the next 75 years, the total shortfall for Social
Security amounts to just 0.4 percent of Gross Domestic Product (GDP).
Meanwhile, during that same period, President Bush's tax cuts just for the
top one percent of earners (a group of people whose average income
exceeds $1 million) will cost 0.6 percent of GDP. All of Bush's tax cuts will
cost 2 percent of GDP during the next 75 years -- or five times the
projected 75-year Social Security shortfall
(http://www.cbpp.org/6-14-04bud.htm) . The current system could be made
solvent for the indefinite future with adjustments in the tax code far
more modest than those approved by Ronald Reagan in 1983
(http://www.newsday.com/news/columnists/ny-saul4056961nov27,0,2589308.column?coll=ny-news-columnists)
to protect Social Security.

PRIVATIZATION MEANS MORE MONEY WASTED ON ADMINISTRATIVE COSTS: Another
little-known fact: Social Security is run very efficiently
(http://www.cepr.net/publications/facts_social_security.htm) . In the
current system, because the funds are managed together, less that 0.6
cents of every dollar paid out in Social Security benefits goes to pay
administration costs. In England, which has adopted privatized accounts
for its retirement system, 15 cents of every dollar paid out in benefits
goes to administrative fees. Even by the Bush administration's own
estimates, in a system of privatized accounts, 5 cents of every dollar
would go to administrative costs, more than 8 times the amount spent on
administrative costs today.