The Bush Plan for Social Insecurity and Inferiority

05/12/2005

Greetings and Salutations!

The debate on Social Security reform is heating up. Both the Senate
and the House of Representatives are starting the process of putting
together legislation to fundamentally change what is arguably the most
successful social insurance program ever created.

President Bush has come out in favor of “progressive indexing” and may
have shot himself in the foot in his mouth. Studies by the Center on
Budget and Policy Priorities (CBPP) and the Center for Economic
Policy Research (CEPR) show that the President’s stated reasons for
radical reform are not supported by the policies he advocates.

Bush Argument #1: Social Security pays a lousy return.
A study by CEPR has shown that under the President’s plan for private
accounts and progressive price indexing, most Social Security
recipients will receive lower not higher returns in relation to
current scheduled benefits.

Bush Argument #2: Without reform, Social Security will go broke in 2041.
The CBPP has estimated that the Social Security Trust Fund will be
exhausted in 2030 under the Bush administration’s plans, 11 years
earlier than with no changes whatsoever.

Bush Argument #3: We must make Social Security solvent on a
“permanent” basis. The Bush plan, which is not complete, would close only 30 percent of the funding gap over the next 75 years, the budget planning window.

Bush Argument #4: We need action now or we will have to raise taxes or
cut benefits later. Under the President’s plans, the Social Security Trust Fund will be exhausted in 2030. This means that the Federal government will either
have to raise taxes or slash Social Security benefits further. The benefit cuts today will lead to benefit cuts or tax increases (ohh, the horror) in the future.

Bush Argument #5: Progressive Price Indexing (PPI) protects the
benefits of low income workers.

Not quite true. There are three groups that will see benefit cuts
under the Bush proposals:

Elderly widows with low incomes who receive a Social Security benefit
based on their deceased husband’s earnings record.

Divorced elderly spouses with low incomes who receive a Social
Security spousal benefit based on their former spouse’s earnings record.

Children with low incomes whose parent has died and who receive Social
Security survivor benefits.

Bush Argument #6 (pronounced “sick"):I want private accounts because I
want private accounts, and I want them now.

This reason is beyond reason, but it might be closer to the truth than
any of the other reasons.

The following web sites are my main sources of information. Please
refer to them for more information and links to other sites on Social
Security.

http://www.cepr.net/publications/rates_of_return_2005_05.pdf
http://www.cepr.net/publications/regressive-progressive_2005_05.pdf
http://www.cbpp.org/5-10-05socsec2.htm
http://www.cbpp.org/5-10-05socsec.htm

Regards,
Loyal D Nelson