Saturday, February 12, 2005


The Latest Kayo

"Social Security is not in crisis, is not bankrupt and is not collapsing." That's what Barbara Boxer told a mixed crowd of seniors and students yesterday at the San Francisco Senior Center at Aquatic Park, and her remarks on the President's proposed privatization scam were plainspoken, punchy, and concise -- a model for any Democrat hoping to frame the debate in straightforward, easily digestible talking points. Step one, as always, is to cut through the "scare tactics and false information":
Even the most conservative estimates say the system will be able to pay full benefits for 38 years, she said, noting that that is hardly a crisis, because it leaves ample time for a reasoned approach to future solvency . . . .

Boxer said the result [of the President's scheme] would be a 45 percent cut in benefits, throwing millions of people into poverty and leaving survivors and disabled workers high and dry, while the government would have to borrow trillions of dollars to shore up the system.

Boxer, a former stockbroker, said she believes in investing, but as a supplement to a guaranteed retirement benefit, not as the primary source of retirement income.

When she asked how many people in the audience had lost money on Wall Street, a forest of hands went up. "You can count on Social Security; you can't count on the stock market," she said.

Boxer said she doesn't believe Bush's promise to people older than 55 that his plan won't affect their benefits.

Boxer said there is a simple way to ensure long-term solvency: Lift the cap on earnings subject to payroll tax above the current $90,000 limit.

Although not among the options mentioned by Bush in his State of the Union address, the idea of raising the cap to $120,000 has been spearheaded in Washington by Sen. Lindsay Graham, R-S.C. . . . .

Although polls have shown that young people expressed interest in investing some of their Social Security taxes, [doctoral student Brooke] Hollister said they withdrew their support when they were informed that privatization could undermine the existing system . . . .

Also in the audience was Michael Roosevelt, the grandson of President Franklin D. Roosevelt, the architect of Social Security.

"What the senator said today is right on the nose," said Roosevelt, 58, a lawyer in San Francisco, in an interview after the talk. Bush's plan "is an effort to get the camel's nose under the tent to eliminate Social Security entirely," he said.
Would it be premature to nominate the Senator for the second weekly "Boxer Badge of Courage" award?

UPDATE: As advocates of the Fairness Doctrine, we think it's the least we can do to offer the President a forum in which to explain the benefits of his proposal. The issue, of course, is an extremely complicated one, and so we apologize if the following widely-quoted remarks from Mr. Bush's Tampa, FL, town meeting on Feb. 4 are too technical for a lay audience:
THE PRESIDENT: Because the -- all which is on the table begins to address the big cost drivers. For example, how benefits are calculate, for example, is on the table; whether or not benefits rise based upon wage increases or price increases. There's a series of parts of the formula that are being considered. And when you couple that, those different cost drivers, affecting those -- changing those with personal accounts, the idea is to get what has been promised more likely to be -- or closer delivered to what has been promised.

Does that make any sense to you? It's kind of muddled. Look, there's a series of things that cause the -- like, for example, benefits are calculated based upon the increase of wages, as opposed to the increase of prices. Some have suggested that we calculate -- the benefits will rise based upon inflation, as opposed to wage increases. There is a reform that would help solve the red if that were put into effect. In other words, how fast benefits grow, how fast the promised benefits grow, if those -- if that growth is affected, it will help on the red.

Okay, better? I'll keep working on it.

That is an excellent talking point! Ask people how many have lost money in the stock market. That pretty much drives the point home doesn't it?
No, George, it doesn't, but Sen. Boxer comment, "be able to pay full benefits for 38 years," does. What happens after 38 years? And, that is only an estimate plus or minus. It seems the social security is as secure as the stock market. sigh. There is a crisis.

Glad you asked. Here's what happens after 38 years, if we do exactly nothing:

In fact there are two official projections -- one by the Social Security Administration (SSA) and a somewhat less pessimistic projection by the Congressional Budget Office (CBO). The President referred to the SSA projection, which calculates that the system's trust fund will be depleted in 2042. After that, the system would have legal authority to pay only 73 percent of currently promised benefits -- and that figure would decline each year after, reaching 68 percent in the year 2075.

The CBO doesn't project trust-fund depletion until a decade later, in 2052, and figures that the benefits cuts wouldn't be so severe, a reduction to 78% of promised benefits. But either way, even a "bankrupt" system would continue to provide most of what's promised currently.

Furthermore, the President did not specify what he would do to fix the problem. He again urged creation of private Social Security accounts. But those would be of no help whatsoever in shoring up the system's finances, as acknowledged earlier in the day by a senior Bush administration official who briefed reporters on condition of anonymity:
Senior Administration Official: So in a long-term sense, the personal accounts would have a net neutral effect on the fiscal situation of the Social Security and on the federal government.
And that "net neutral effect" is just over the long term, 75 years or more. In the shorter term, creation of private accounts would require heavy federal borrowing to finance the payment of benefits to current retirees while some portion of payroll taxes is being diverted to workers' private accounts. The administration projects it will borrow $754 billion (including interest) through 2015 to finance the initial phase-in of the accounts, and much more thereafter. The liberal Center on Budget and Policy Priorities -- which opposes Bush's proposal -- projected that $4.5 trillion (with a "t") would be required to finance the first 20 years of the accounts after they start to be phased in in 2009.
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