• Social Security: A moldy oldie Social Security: A moldy oldie By the St. Louis Post-Dispatch – October 23, 2004 If this presidential race had a theme song, it would be the Isley Brothers’ oldie “Twist and Shout.” Twist your
• Social Security: A moldy oldie
Social Security: A moldy oldie
By the St. Louis Post-Dispatch – October 23, 2004
If this presidential race had a theme song, it would be the Isley Brothers’ oldie “Twist and Shout.” Twist your opponents positions, then shout about it.
John Kerry, who used to sit wallflower-like while George W. Bush twisted away at the Democrat’s expense, is now out on the floor and twisting too. He grabbed a second-hand Bush quote from last Sunday’s New York Times Magazine, stretched it out of shape, and knocked Bush over the head with it.
According to the Times, Mr. Bush told a private meeting of donors that, “I’m going to come out strong after my swearing in with fundamental tax reform, tort reform and privatizing Social Security.”
Sen. Kerry translated that to mean that President Bush is planning a “January surprise” that would cut Social Security benefits for seniors by 25 to 45 percent. He warned that “the promise of Social Security is going to be broken.”
President Bush said no such thing of course. Mr. Kerry is being unfair to him. Not that he needs to. Mr. Bush’s actual public position on Social Security should give Democrats enough to complain about.
Mr. Bush favors letting younger workers put some of their Social Security payroll taxes into individual accounts. That’s a far cry from privatizing the whole system, but it’s still a very bad idea.
Despite all the accounting folderol about a Social Security trust fund, America has a pay-as-you-go retirement system. Payroll taxes from today’s employers and workers pay for today’s retirees. In fact, those taxes produce a surplus of about $40 billion a year, which goes to fund the rest of government.
But as more people retire, that surplus will shrink. Fifteen years from now payroll taxes will no longer bring in enough money to cover Social Security checks, and the government will have to find some more cash. That means higher taxes, cuts in benefits or more government borrowing. It’s not a pretty picture.
If we let young people divert payroll taxes to private accounts, the crunch will be bigger and arrive sooner. Mr. Bush has never been specific how much young people might divert. But quite a few such plans have been suggested in Congress.
Adopting one of the more popular suggestions could put a $1 trillion hole in Social Security over 10 years, according to the Concord Coalition, a group that promotes balanced federal budgets. How would we fill that hole? Think borrowing, taxes or benefit cuts.
Young people opting for private accounts would presumably be entitled to less than the normal Social Security check. They’d be betting that their private accounts – invested in stocks and bonds – would earn them more than the difference.
Now imagine that you had retired in early 2000, with your Social Security check dependent on the stock market, and then watched the market lose nearly half its value over two and a half years.
This is obviously a bad idea.
