February 8, 2005
Debt Ownership SocietyThe plan has been simple all along. Convince the public that Social Security is in imminent "crisis" and that partial privatization is the solution. Let's forget for a moment that the Bush Administration has dropped the word "crisis" and no longer pretends that privatization will solve anything. The question usually glossed over by the champions of privatization is: just how much will this "solution" cost and is the cost worth it?
Dick Cheney on Fox said, "[w]e're going to borrow $758 [b]illion over the next 10 years to set up the personal retirement accounts. We think that's a manageable amount ... Trillions more after that."
That $758 billion initial transition cost is misleading. Before the SOTU speech, a background briefing provided by the White House outlined some details of George W. Bush's privatization plan. "Some" is the operative word here, because Mr. Bush has been vague all this time as to what exactly the plan is. Could it be because the details would be so unpopular that the plan will be DOA? Something to think about.
Anyway, based on that briefing, the Center on Budget and Policy Priorities found the transition cost of the plan to be much higher than $758 billion. A more correct figure is $1.4 trillion for the first ten years from the launch date of 2009. For the first twenty years of the plan, the total cost balloons to $4.9 trillion.
Back in December, White House Press Secretary Scott McClellan justified the transition cost [which was then estimated at $2 trillion] by saying, "We keep talking about cost. It's a savings, because the cost is $10 trillion of doing nothing, and this will actually be a savings from that cost of doing nothing."
By $10 trillion, he meant the Social Security shortfall. Except that $10 trillion is Social Security's estimated shortfall in perpetuity, a figure which the American Academy of Actuaries opined is useless and misleading. A more common benchmark for calculating Social Security's finances is 75 years, and within that period, the shortfall is $3.7 trillion.
We have a huge national debt mainly because of the Iraq war and Bush's tax cuts. The national debt is the biggest threat to Social Security yet the Administration is proposing we take on $4.9 trillion more debt when the shortfall is only $3.7 trillion? What the...?!
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