08 November 2004

IT'S SOCIAL INSECURITY
Bush suspends logic on Social Security with plan that would expose elderly

Oozing the relaxed confidence of a man just re-elected president, George W. Bush said Thursday that reforming Social Security will be a priority in his second term. "We'll start on Social Security now," he promised. Bush has also made it clear that, for him, reform means creating private investment accounts.

But he has never answered the trillion-dollar question: How do we pay the cost to get from here to there?

Bush avoided confronting that key question during his first term. He sidestepped it on the campaign trail. And he slipped past it again Thursday.

Here's the problem. Bush wants to allow workers to siphon off a portion of their payroll taxes into private accounts and invest it in the stock market for their eventual retirement. But Social Security is a pay-as-you-go program. The payroll taxes of current workers pay the benefits for current retirees. So every dime that goes into private accounts is a dime that won't be available to pay benefits for retirees today and in the near future.

Experts say that hole - the transition cost - will be $1 trillion, maybe $2 trillion.

Asked about that Thursday, Bush said the cost of doing nothing is much greater than the cost of reforming the system today. True. But that's no answer to the trillion-dollar question. It's also possible that some relatively minor tinkering with aspects of the system - increasing the retirement age or cost-of-living adjustment, for instance - could shore it up for years.

The President's Commission to Strengthen Social Security, whose 2001 report Bush pointed to as a blueprint for change, laid out three models for adding private accounts. Each, it said, would require "transitional investments."

Four years ago the federal government had a projected multitrillion-dollar surplus. A portion of that cushion should have been devoted to Social Security reform. But the reverse alchemy of tax cuts, war and recession has turned that surplus into a multitrillion-dollar deficit. Making Bush's tax cuts permanent will swell the deficit even more.

In sketching out his second-term agenda, Bush remained incredibly sanguine. "I earned capital in the campaign, political capital, and now I intend to spend it." Too bad that political capital isn't real capital, as in actual dollars and cents.

Newsday

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