Editore"s Note
Tilting at Windmills

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January 14, 2004
By: Kevin Drum

HOT AIR ON SOCIAL SECURITY....In a display of almost breathtaking chutzpah over at NRO, Michael Tanner takes the Democratic candidates to task for not clearly stating what they will do about our Social Security "crisis." By contrast, George Bush is a paragon of forthrightness:

George Bush has made his position clear: He would allow younger workers to invest a portion of their payroll taxes privately through individual accounts. White House sources have spent the last several weeks telling reporters that support for Social Security changes will be a central domestic plank in Bush's reelection bid. Whether you support his proposal or not, at least you know where he stands.

But there's a part of his plan that Citizen Bush doesn't like to mention: the several trillion dollar hole it will bust in the budget by diverting current Social Security revenue into private accounts. He is strangely reluctant to talk about that, but let's face it: anyone can solve the Social Security funding shortfall if they're allowed to just open up ever larger deficits.

As soon as Bush fesses up to the real cost of his plan, and does it using the same arithmetic that I learned in grade school, I'll know where he stands. Until then, let's cut the nonsense.

POSTSCRIPT: Not clear what I'm talking about? Here's the nickel version:

  • If workers are allowed to divert some of their SS taxes to private accounts, that means that revenue flowing into the system decreases.

  • However, we have to continue paying benefits to current retirees. After all, it's not fair to cut their benefits at this point.

  • Today's revenue pays for today's retirees, so if SS revenue decreases while benefits stay the same, we get a deficit. Or, to put it more accurately, we get an even bigger deficit than the one we'd have anyway. This would continue for several decades until the transition period was over.

It's not a plan until Bush explains how he's going to deal with the enormous deficit it creates. He hasn't done that yet.

Kevin Drum 4:52 PM Permalink | Trackbacks

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