Not just socially insecure; we're socially retarded

Aside from the fact that the President announced yet another way to enshrine wealth as a legacy (pass on the money in your account? Jefferson, what?), it appears that all this "you get to keep it all for yourself, the no good government has to keep its dirty hands off" stuff just isn't true at all. An article in today's Post runs through the plan as described by another headless horseman ("senior administration official"). This is a very good article on what the changes would actually look like.

The Numbers:

Under the system, the gains may be minimal. The Social Security Administration, in projecting benefits under a partially privatized system, assumes a 4.6 percent rate of return above inflation. The Congressional Budget Office, Capitol Hill's official scorekeeper, assumes 3.3 percent gains.

The Catch:

[Under the convoluted rules of the new plan (read the article for more),] with a 4.6 percent average gain over inflation, the government keeps more than 70 percent. With the CBO's 3.3 percent rate, the worker is left with nothing but the guaranteed benefit.

The really scary part:

If instead, workers decide to stay in the traditional system, they would receive the benefit that Social Security could pay out of payroll taxes still flowing into the system, the official said. Which option would be best is still unclear because the White House has yet to propose how severely guaranteed benefits would be cut for those with individual accounts.

This creates the same problem as Health Savings Accounts: young (mostly healthy) people move out of these programs, leaving the chronically ill or chronically poor to fend for themselves in a program who's coffers have run dry and they bear the burden of risk, even though they are already among the most vulnerable segments of the population.

Paul Krugman had a great Op-Ed about why the math is wrong. There's an inconsistency in the numbers he uses and the ones the Post article use (he says the SSA uses a 6.5 or 7% return above inflation number, and the Weisman article says 4.6. Honestly, I don't have the faintest which is right), but article itself is good. To summarize: All evidence points to the fact that partially privatizing Social Security appears to offer no discernable benefit above and beyond the current program, while greatly increasing risk, to the tune of a trillion dollars. If the economy continues growing with no contractions, it might offer a slight bonus to some. Even in this rosy happy land of money tree orchards, the government is still going to be taking a huge chunk of the gain away. And -- voila! --


p.s.: Anyone else see Dick Chaney lose it last night during the state of the union, when Bush said that the Administration was "open to all suggestions" about how to fix social security? He started laughing so hard he had to move his head off camera. I mean, please.