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[Gene GeRue <genegerue AT ruralize.com>]

This fourth post on the subject balances it out, two for and two against 
the proposed privatization plan. This one is against. Have any of you found 
a site that has actual proposed language of a privatization plan? Seems to 
me that the Bush administration is waving the privatization flag to see how 
many bullets will be shot at it and the nature and quality of those 
bullets, so they can then be prepared to overcome all objections.

Selling Social Security
By Dean Baker, In These Times. Posted December 13, 2004.

Nov. 2 was just the beginning of the bad news. Two days after the election, 
before most of us had even recovered, President Bush told the country that 
he would use his “political capital” to privatize Social Security.
This declaration of war was smart strategy. Social Security is by far the 
country’s most important and successful social program. Over the last seven 
decades it has provided a decent retirement to tens of millions of workers 
and their spouses. It also provides disability and survivor insurance to 
almost the entire working population – nearly two million children are 
currently receiving survivors’ benefits. For these reasons, Social Security 
enjoys enormous public support, regularly getting approval ratings of close 
to 90 percent in public opinion surveys.
If Bush is going to privatize Social Security, he must move hard and fast – 
as he has. And if we are going to save it, progressive forces will have to 
mobilize quickly.
Fact vs. Fear
The key to stopping this drive for privatization will be to educate the 
public about the basic facts on Social Security. For two decades, the right 
has been working overtime to undermine confidence in the program. Groups 
like the Concord Coalition have been telling the country that Social 
Security is a Ponzi scheme that will inevitably collapse once the baby 
boomers retire.
The fearmongers have been largely successful. Many workers, especially 
those under 40, are convinced that Social Security will be bankrupt before 
they see a dime in benefits. For these people, the promise of a private 
account sounds pretty good, since they don’t believe they will ever get 
anything from Social Security anyhow.
Progressives must use every means available to tell people that they have 
been lied to about Social Security. The program is unambiguously healthy. 
The Social Security trustees’ report (available on the Social Security 
Administration’s Web site) shows that the program can pay every penny of 
benefits through the year 2042, with no changes whatsoever.
Even after 2042, the trustees’ projections show that while the program 
won’t have enough to pay currently scheduled benefits – which are 
approximately 40 percent higher than current benefits – it will still have 
enough money to pay benefits higher than those that current retirees 
receive, even when indexed for inflation. The changes necessary to allow 
full scheduled benefits to be paid throughout Social Security’s 75-year 
planning period are smaller than the changes to Social Security – increased 
Social Security taxes and benefit cuts – that were made in each of the 
decades from the 1950s through the ’80s.
Last June, the nonpartisan Congressional Budget Office (CBO) made an 
independent assessment of Social Security’s finances and concluded that the 
program could pay all benefits even longer – until 2052 – with no changes 
whatsoever. According to the CBO, the changes needed to keep the program 
fully funded through its 75-year planning period are less than half as 
large as the Social Security tax increases put in place in the 1980s.
Just to be clear, neither of these projections is based on a rosy scenario 
about the future. In fact, the Social Security trustees assume that over 
the next 75 years the economy will experience the slowest pace of 
productivity growth in its history – there’s no “new economy” in this story.
In short, the claims that Social Security is in imminent danger of 
bankruptcy are just like the claims about Saddam Hussein’s weapons of mass 
destruction – politically motivated lies.
One such claim that gets frequently repeated is that the Social Security 
trust fund has been “raided,” “spent,” or is just worthless pieces of 
paper. In fact, the Social Security trust fund holds almost $2 trillion of 
government bonds. Under the law, the government must repay these bonds to 
Social Security from general revenue – this means it will be repaid 
primarily from progressive personal and corporate income taxes, because 
workers have already paid for their Social Security benefits. In other 
words, the government is obligated to tax wealthy people like Donald Trump 
and Peter Peterson (the founder of the Concord Coalition) to pay for the 
Social Security benefits that the rest of us have already earned.
The Social Security system lent money to the government to buy these bonds. 
(This is by design – the trust fund was built up to help pay for the 
retirement of the baby boomers.) The fact that the government spent the 
money is meaningless – just as it is meaningless if the government spends 
the money it borrows by issuing any other bond. The government is still 
legally obligated to repay the bond. In short, the people who say “there is 
no trust fund” are misleading the public. There is a trust fund with $2 
trillion (growing at the rate of $200 billion a year) unless we let 
Congress eliminate it.
Privatized Pipe Dreams
Are private accounts a remedy?
The Bush privatization plan proposes to couple newly created private 
accounts with large cuts in current basic Social Security benefits. Under 
this scheme each retiree will get benefits from both these sources.
First, it is important to realize that the privatizers are making 
implausible claims about the potential returns available from investing in 
the stock market. Remember, these are exactly the same people who at the 
peak of the Internet bubble in 2000 promised that workers would get great 
returns from investing their Social Security money in the stock market.
No privatizer has yet been able to document in numbers how the privatizers 
will get their projected stock returns (showing annual dividend payouts and 
capital gains). When it comes to simple arithmetic, involving trillions of 
dollars of workers’ Social Security money, the privatizers flunk the test.
While private accounts won’t do much to increase returns, they will 
certainly increase risk and add hugely to administrative costs. A worker 
who happens to retire during a market slump will see much of their benefit 
disappear. In countries that already have private accounts, like England 
and Chile, the administrative fees are between 15 and 20 percent of annual 
benefits. By comparison, the administrative costs of Social Security are 
less than 0.6 percent of annual benefits. In addition, retirees who want to 
buy an annuity (an inflation-protected life-long annual payout, like that 
provided by Social Security) will typically have to pay a fee of at least 
10 percent of their private account to convert their account to an annuity.
The bottom line is that under Bush’s proposal, workers can expect to see 
considerably reduced benefits, since private accounts will not come close 
to making up for the accompanying benefit cuts. Under the plan that would 
provide the basis for Bush’s privatization scheme, an average 15-year-old 
today who retires in 2055 will lose more than 35 percent ($160,000) of his 
currently scheduled benefit over the course of his retirement. He stands to 
gain back less than one-third of this $160,000 loss from a private account.
Social Security privatization does not look good for most workers because 
they can expect large benefit cuts, but it is likely to be especially bad 
for those in lower-income brackets. While Bush’s privatization plan 
actually provides modest benefit increases for low-end workers, it also 
puts in place a structure that will force the middle class to depend less 
on the traditionally defined Social Security benefits and more on private 
retirement accounts.
Bush’s plan gradually reduces the size of the traditional benefit received 
by middle-class workers, while increasing the size of private accounts 
until finally the defined Social Security benefit will become almost 
irrelevant to anyone but the poor. Under the Bush plan, a child born today 
who earns an average wage during his working lifetime would get a defined 
benefit equal to just 10 percent of his wage when he retires. As the middle 
class depends less and less on Social Security, the benefits pledged to the 
poor would enjoy about as much political support as welfare does today. Now 
that would really be a “Mission Accomplished”!
The privatization of Social Security can be stopped. Bush may no longer 
have to worry about re-election, but members of Congress do. There can be 
no more important battle. If Bush is stopped on Social Security, then his 
political capital will have been spent, and he will be the lamest of lame 
ducks. On the other hand, if he wins ... well, that’s not going to happen.
Dean Baker is co-director of the Center for Economic and Policy Research.
http://www.alternet.org/election04/20721/