http://www.boston.com/news/globe/editorial_opinion/editorials/articles/2005/01/06/savaging_social_security/GLOBE EDITORIAL
Savaging Social Security
January 6, 2005
AMERICANS SHOULD not be deceived by all the talks about the benefits of Social Security privatization. It is really a smokescreen to disguise the real purpose of the Bush administration's Social Security proposal: to reduce the guaranteed monthly benefit for millions of future retirees so there will be more money available for the government initiative President Bush prefers -- his income tax cuts that mainly benefit the wealthiest Americans.
Bush will not reveal the details of his plan until late February, but enough information is coming out of the White House to suggest the outline. It sounds innocuous: Merely change the basis by which Social Security benefits are calculated. Instead of being based on wages Americans earned during a lifetime of work, benefits would be determined by how much the cost of living went up during that time.
This change would barely affect payments to people who retire over the next few years, but because wages rise faster than inflation, the new formula would stunt the growth of benefits by the middle of the century. In 2065, according to a New York Times analysis, a middle-income worker would be entitled to a yearly benefit of $14,600 (figured in today's dollars). Under current law, that person would get $26,400 a year.
Future retirees could supposedly make up the difference from the amount of the payroll tax that Bush would allow them to divert to private accounts, but there's no guarantee that their investments would generate an adequate return. What is certain is that Social Security would play a progressively less important role for millions of retirees, and support for the system would erode.
Reducing the guaranteed benefit would, however, minimize an awkward problem for Bush and the Republican members of Congress who lowered taxes over the past four years. The deficits that this policy worsened are partly masked by borrowing from surpluses generated by the Social Security payroll tax. These surpluses are invested in government bonds, to be redeemed for the baby boomers' Social Security benefits.
Most of the tax cuts expire in a few years, and Bush wants to make them permanent. Bush's tax schedule will be difficult to sustain if the structure of Social Security benefits remains intact. Unless they are reduced, the government will be under pressure to restore the income tax rates to pay off the bonds.<snip>
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