NYP: SOLVENCY IS THE SOLUTION (the Social Security impasse)

New York Post ^ | July 25, 2005 | JAMES K. GLASSMAN

[OESY]

...It's time for a new approach.

But, before I tell you what it is, understand why the current efforts are failing:

* Americans have grown used to Social Security over 70 years, and change is both threatening and confusing.

* Reform has no strong constituency to rally support. Financial-services firms, for example, might benefit from the proposed personal accounts, but, at the same time, these firms fear that strict regulations, applied to the new accounts, would spread to 401(k) plans and other lucrative tax-favored plans that currently exist.

* Opponents, mainly AARP (the seniors' lobby), have mounted a wildly distorted but effective anti-reform campaign.

* Finally, the president's rhetoric is unconvincing. Yes, he's made the case that Social Security is headed for insolvency — tax receipts from workers and employers won't cover benefits for retirees starting in 2018. But he has not managed to connect insolvency with his idea of personal accounts.

No wonder. These are two completely separate issues. Personal accounts won't prevent Social Security's impending bankruptcy. Personal accounts are great for other reasons: they will encourage savings, provide a more comfortable retirement, give people a nest egg they can own and increase personal responsibility. But the accounts won't solve the insolvency problem.

Bush should stop talking about these two issues — insolvency and personal accounts — as though they are connected. He needs to concentrate on one or the other to start....

[dirtboy]

Two other wrinkles: First, adopt what's called the Pollock Plan (named after my colleague at the American Enterprise Institute, Alex Pollock, and now a Senate bill). All the bonds issued by the Treasury when it borrows Social Security money should go directly into the accounts of individual workers, rather than to a trust fund.

No thanks. All that does is move IOUs from the government to individuals. But the government still spends the surplus.

[Piquaboy]

AARP members have to be idiots for joining that communist organization.

[KarlInOhio]

The Pollock plan is slightly better than what we have now. At least it is as much of a guarantee as any other bond instead of being paid at the whim of Congress. It would be nice if those bonds could be resold on the market by the people so if they wanted to buy stocks instead they could.

[dirtboy]

The Pollock plan is slightly better than what we have now

I disagree. The entire point of collecting a surplus was to avoid having to raise taxes. But those IOUs can only be redeemed by raising taxes.

And what's worse, putting those IOUs into accounts, complete with phantom earnings, will further perpetuate the fraudulent idea that they are actual assets.

People need to realize just what the government has done with the surplus. And demand that government shrink spending and allow the people to keep that money instead (I hate using the word "allow", but in this day and age, that's what it amounts to).

[Mind-numbed Robot]

The entire point of collecting a surplus was to avoid having to raise taxes.

You and I agree but I would like to pick a nit here. That is the selling point. The real reason is to have an ongoing slush fund for the liberals to spend on pork.

[dirtboy]

The real reason is to have an ongoing slush fund for the liberals to spend on pork.

Dems and pubbies alike. That's the problem with bipartisanship - it means there are two sets of hands reaching for your wallet instead of just one set.

[OESY]

Democrats Offer (Non) Social Security Option


The Washington Post says that the Democrats have prepared a counterproposal for Social Security reform intended on competing with that of the Republicans. However, after reading the report by Mike Allen, it sounds as if the Democrats want to reform Social Security by ignoring it altogether:

House Democrats intend to propose a retirement-savings plan today that will be their first leadership-backed alternative to Republican plans for a broad retirement-security package, which includes changes to Social Security.
The Democratic plan, called AmeriSave, would increase incentives for middle-class workers to participate in 401(k) retirement accounts and individual retirement accounts. It would also create tax credits for small businesses that set up retirement accounts for their employees. ...

The AmeriSave announcement is designed to partially preempt Ways and Means Committee Chairman Bill Thomas (R-Calif.), who plans to focus on retirement security in September. Bush had proposed adding individual accounts to Social Security for younger workers, but the idea did not win public support. He has now started talking about his plan as "senior security."

Thomas has long said that he wants to deal with Social Security as part of a comprehensive retirement package that would cover savings, pensions and Social Security.


Notice, though, that the plans have no component of reform for Social Security. They only adjust existing programs to allow for increased savings and give a few more tax incentives for small businesses to create their own retirement plans. While these goals may have their merits -- they appear to make sense to me at first blush -- neither have anything to do with the problems facing Social Security in the next generation.

In fact, by emphasizing the importance of wholly-owned personal accounts and vested retirement plans, the Democrats underscore the President's efforts to grant some ownership of the funds that Social Security drains from workers and employers each week. Pension plans and 401Ks rely on private management of retirement funds and have the benefit of developing real equity, a major flaw in Social Security, and one which Bush's limited privatization cures. Why not put that same principle to use for Social Security funds, if it works with the rest of our money? The Democrats don't explain that.

The Democrats have taken a lot of criticism for talking about the coming crisis in Social Security financing for a decade before Bush came to office, and then suddenly pretending it didn't exist. When Bush presented his plans to reform Social Security, they tried to convince people that reform was unnecessary, which no one believes, and then deliberately decided to offer no alternative, which no one appreciated. Now they attempt to offer "retirement security" by focusing on the money the government doesn't confiscate without addressing the funds that it does.

Maybe this wan attempt will take some political heat off the party for its obstinate refusal to engage on Social Security. It shouldn't. It looks like yet another attempt to change the subject by ignoring the main problem.

-- Captain Ed, http://www.captainsquartersblog.com/mt/