In his State of the Union Address, President Bush laid out his plan to "fix" Social Security. As with his other policies, the president's Social Security reform is based in fear-mongering. Right now, Social Security revenues exceed expenditures. We have 40-50 years to reinforce the system with deliberate and rational solutions. This plan diverts money away from social services and to private corporations and requires further federal deficits. This Plan is entirely flawed and serves as abdication of yet another government responsibility, this time to our neediest citizens.
The first problem is that the plan shifts all the risks of retirement to the people. While many of us plan and save and have our 401(k), most of America's working poor do not have that luxury. The president wants to ensure that "lower-income Americans get the help they need to have dignity and peace of mind in their retirement." These are people who work hard for 40 years yet rarely have disposable income available for saving. Private investment accounts will provide no dignity, no peace of mind if they can't take advantage of them.
The second problem is that the plan is fiscally unsound. In his speech, the president stated that by 2033, the annual shortfall would be more than $300 million. According to presidential advisers, the cost of privatization could require the United States to borrow $1 trillion to $2 trillion over the next 10 years, and $15 trillion over the next 40 years. Even the most basic cost-benefit analysis reveals the absurdity of this plan.
The third problem is that the administration has not clearly identified the impact upon Social Security's disability programs. The Social Security Commission proposed cutting these benefits 46 percent, even though disabled Americans won't have the benefit of that private investment account. Yet, there was no mention of the 6.2 million disabled beneficiaries Wednesday night. Perhaps they just aren't important enough to the president to merit mention.
There are other options. One way to increase payroll tax revenue without raising tax rates is to create more high-paying jobs for Americans. In the last quarter of 2004, the average hourly wage was $15.84. If the federal government spent the next 50 years promoting more high-paying jobs, the payroll tax revenues would increase as Americans' wages increased, without raising the tax rate. An option that incorporates the president's desire to support private investment (let's put aside the lessons learned from MCI and Enron for now) is to invest Social Security's current surplus. The Congressional Budget Office reports Social Security's 2003 dedicated revenues exceeded outlays by $68 billion. If the president is so sure private investment is the cure for Social Security's woes, why not invest this surplus now so that there is an annual income and protected principal over the next 50 years? That leaves the risk with the federal government instead of America's workers. And an option almost too radical to mention, decrease federal spending elsewhere and fully fund Social Security.
J. Kate Burkhart is a Juneau attorney working with poverty populations and federal benefits programs.