Sunday, February 06, 2005

Social Security privatization: Revised theft

"Thank you for calling your government. How can we shaft you today?"

After reading the analyses of Bush's SS privatization plan here (Washington Post), here (Ft. Wayne Journal), and here (White House press briefing transcript) I'm definitely not a believer. It's a tiny step in the right direction, but nowhere near as attractive a solution as the Bushies would have us believe.

Fer instance:
If a worker sets aside $1,000 a year for 40 years, and earns 4 percent annually on investments, the account would grow to $99,800 in today's dollars. All of that money would be the worker's upon retirement. But guaranteed benefits over the worker's lifetime would be reduced by approximately $78,700 -- the amount the worker would have contributed to Social Security but instead contributed to his private account, plus 3 percent interest above inflation. The remainder, $21,100, would be the increase in benefit the worker would receive over his lifetime above the level he would have received if he stayed in the traditional system.

It appears to me that the government is the primary beneficiary of the benefits of privatization.

Another thing no one seems to be talking about--and maybe I've missed something here--but what of the 2.25% that still goes in the traditional SS plan? In other words, we get the benefits of the 4% we've invested in the optional "private" accounts, less the benefits we would have received under the traditional plan, but still have to pay the 2.25% for the traditional portion of the plan.

(Found on Wendy, with additional commentary here.)