For years, Social Security was supposed to be the “third rail” of American politics — the one no wanted to touch. George W. Bush treaded gently into this area in the 2000 campaign, emphasizing (without details) his desire to privatize the system by allowing workers to invest money in private accounts instead of the Social Security system.
Al Gore tried to explain the incredible stupidity of Bush’s plan, but it was kind of complicated, the press never really picked up on the debate, and Bush never suffered for having touched the “third rail.”
That said, after getting inaugurated, Bush allowed the plan to move to the back-burner, instead focusing attention on his multiple tax cut plans.
However, with the White House beginning to organize next year’s campaign strategy, the plan to privatize Social Security is working its way back to the forefront. Truth be told, I’m delighted. This could be exactly what the Dems needed.
The Washington Post noted today that the White House is “reviving” Bush’s Social Security plan for the 2004 campaign, and plans to spend “a lot of money” promoting the idea before Election Day.
The White House believes it won’t have to worry about facing the wrath of elderly voters because the Bush plan wouldn’t affect them directly. Under his plan, people who are already receiving Social Security will continue to have the same benefits, but younger workers will be able to invest their payroll taxes into personal, private accounts.
On its face, the plan has appeal and decent support in the polls. People seem to like the idea of investing their own money in planning their future. Bush is hoping to make this case on the campaign trail (expect to hear a lot of “it’s your money!”), so that if he wins, privatization of Social Security will be part of his “mandate.”
I think he’s crazy. Not only is this an incredibly risky political plan, it’s also based on a plan that literally cannot work.
One of the more traditional criticisms of privatization is the sometimes-wild fluctuations in the stock market. The idea is that if retirees happen to plan their retirement when the market is in a downturn — such as the one that’s existed through almost all of the Bush administration — they may lack the investment income they’ll need.
This is a perfectly legitimate criticism, but as far as I’m concerned, it’s not the plan’s fatal flaw.
Social Security is a pay-as-you-go system. The people who are paying payroll taxes are paying for the benefits of those who collect Social Security checks. It’s worked this way since its inception — the working generations pay for the retired generation, knowing that when it’s their turn to retire, future working generations will pay for them.
If you allow workers to stop paying Social Security taxes so they can invest that money on their own, they’re taking money out of the system that would otherwise pay for the benefits of retirees. In other words, if my payroll taxes help subsidize my grandmother’s Social Security check, and then I get to take my taxes out of the system, who pays for my grandmother (and, for that matter, everyone’s grandparents)?
Bush has promised that his plan can be implemented without cuts in benefits. That’s great, but it begs the question: if benefits will stay the same, where’s the rest of the money going to come from? If the Social Security system is dependent on the payroll taxes of existing workers, and those taxes are now in private accounts, how will Bush make up the difference?
He’s never explained how. There’s a good reason — he can’t.
In fact, the White House created a not-so-independent commission to recommend how Bush’s plan could be implemented. The commission, whose members were hand picked by the White House, said it would cost $2 trillion to make up for the money that would be removed from the system.
Early on, Bush thought this was feasible. After all, Clinton left him with the biggest surpluses in American history. Bush figured he could direct some of that money into keeping Social Security solvent while allowing privatization.
But as we now know, those surpluses are gone, erased by enormous tax cuts for the wealthy, and replaced with enormous deficits. As a result, Bush is left with an incredibly expensive, incredibly risky, and impossible-to-implement plan.
Which he’s apparently anxious to campaign on.
This is a campaign debate that Democrats are anxious to have. Stan Greenberg, a Democratic pollster who worked for Gore in 2000, told the Post, “I hope they do it.” A strategist for another Democratic presidential campaign said Bush “might as well pour gasoline on himself and light a match.”
Democratic giddiness aside, the White House and the congressional GOP seems serious about this. In July, a Bush campaign official told The Hill that the president will run “big time” on this issue. In June, Ari Fleischer said Social Security privatization “remains a very important priority for the president.”
If we’re really lucky, the White House will pursue this as a key piece of their campaign’s domestic policy initiatives. My fingers are crossed…