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While Bush has not put a specific plan on the table, what is known is his intent to divert perhaps up to 3 % of the OASDI payroll tax, leaving only perhaps 9.4% of what is now a 12.4% tax to pay checks to current retirees, and to then borrow the money then needed to fill that fiscal hole in order to allow full Soc Sec checks to continue to be sent out. The borrowing is called the Transition Costs and is $2 Trillion dollars added to the current $7 Trillion Nation Debt over the next 10 years - and $15 trillion added to the Debt through the year 2060. The 3% that is diverted would go into private accounts where it would be invested the mutual funds that you would select from among the selection of diversified mutual funds that are offered - this is Bush's "ownership society" concept since you would own what is in those private accounts. The 3% diversion would be voluntary, and you could choose to divert any percentage from zero to 3%.
The reason why this change is needed, per Bush, is the fact the Financial Projection called "Intermediate" says that in the year 2042 (in the Soc Sec Projection), or 2052 (in the General Accounting Office projection) the system's Trust Fund Assets run out and the payroll tax in that year will only be able to pay 73% (in the SSA projection) or 80% (in the GAO projection) of the benefits promised in that year. The current value today of those shortfalls from 2042 to 2078 is $3.7 Trillion in the "Intermediate" projection.
But Bush admits the Soc Sec projection is a bogus reason for these private accounts as they will do nothing to help improve the Soc Sec projected shortfall in 2042 under the intermediate projection. Indeed they add to the National Debt and to the taxes needed to manage that debt in the future. So Bush also cuts the currently guaranteed Soc Sec benefit by 50% over the next 50 years via moving to a CPI index rather than current wage base index in the calculation of the initial retirement benefit, hoping you will do fantastically in the Stock Market and end up with a private account value that can buy you the piece of Soc Sec's guaranteed benefit that has been cut.
Indeed the private accounts are an inefficient way to use the payroll tax, as the British have found as the British accounts soak up more 1% of their value each year in fees paid to the companies that will do the record keeping, and people make poor or unlucky investments decisions, with the result the lowered British guaranteed benefit is all folks have and they end up on Welfare.
All this to avoid Bush's Soc Sec fiscal "iceberg" - an iceberg that just melts away to nothing if we move from the "intermediate" projections economic growth of 1.6% in Gross National Product, to the more reasonable economic growth assumptions of the other Social Security Administration projection.
The Bush agenda isn't to strengthen SS, but ultimately to get rid of it - replaced with private accounts that may, or may not, fund your retirement - Private Accounts that will cost much more to set up than it would cost to "fix" the current system, assuming we find we actually need to fix the system 40 years from now.
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