"The Money in the Account" is NOT All Yours

[kerrygoddess]

"The Money in the Account" is NOT All Yours
2 February 2005


The Washington Post has an article that does a good job debunking the White House Social Security Plan. Particularly this statement from Bush’s speech tonight:

“You'll be able to pass along the money that accumulates in your personal account, if you wish, to your children . . . or grandchildren. And best of all, the money in the account is yours, and the government can never take it away."

Jonathan Weisman, WP Staff Writer says that the plan “is more complicated” than Bush is letting on…

http://www.lightupthedarkness.org/blog/default.asp?view=plink&id=313

[Erika]

1. Bush lied once again tonight

He suggested that private accounts could reach a 3 to 5% return level. His program caps earnings at 3% with the rest given to the bankers.

[kerrygoddess]

2. Ain't that special!

LIAR IN CHIEF!

[jojo54]

3. Does anybody get a wage adjustment for inflation anymore?

The last time I got one was the late 80's. I want that 3% damn it!! If I earned it, it's mine....ALL MINE!

[kerrygoddess]

10. Wage Adjustment?

LOL! Wouldn't that be nice.

[BrklynLiberal]

4. Boy! All these people who think they are going to get rich on these

"private accounts" are in for a really big surprise.

[kerrygoddess]

6. No kidding!

I was pissed when I read it.

[NYC]

5. Thanks for posting this.

Spread the word.

[BlueInRed]

7. When you combine that with what Krugman says about the rate of return

You'd end up getting nothing, more than likely. Krugman talked about the fact that the projected rate of returns rely upon an economy performing at unbelieveable and unprecedented rates. I think the article was Tuesday's.

[kerrygoddess]

8. Krugman has a piece on this in tomorrow's NY Times

Gambling With Your Retirement
By PAUL KRUGMAN

Published: February 4, 2005

A few weeks ago I tried to explain the logic of Bush-style Social Security privatization: it is, in effect, as if your financial adviser told you that you wouldn't have enough money when you retire - but you shouldn't save more. Instead, you should borrow a lot of money, buy stocks and hope for capital gains.

Advertisement


Before President Bush's big speech, a background briefing by a "senior administration official" made it clear that the plan calls for exactly the "borrow, speculate and hope" strategy I described - not just for the system as a whole, but for each individual.

Here's the money quote: "In return for the opportunity to get the benefits from the personal account, the person forgoes a certain amount of benefits from the traditional system. Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent rate of return" - after inflation - "which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent rate of return."

Translation: If you put part of your payroll taxes into a personal account, your future benefits will be reduced by an amount equivalent to the amount you would have had to repay if you had borrowed the money at a real interest rate of 3 percent.

Peter Orszag of the Brookings Institution got it exactly right: "It's not a nest egg. It's a loan."

http://www.nytimes.com/2005/02/04/opinion/4krugman.html

[merwin]

9. I'm utterly shocked!

[AirAmFan]

11. INSURANCE companies are GUARANTEED to get 100% of many

"privatized" accounts, since the plan is not to allow any withdrawals until a poverty-level annuity premium has been saved up.

ONLY THE WEALTHIEST would have any prospect of "owning" their "privatized" accounts and passing them on to heirs. Everyone else would give up guaranteed benefits, take on stock market risk, presumably receive lower benefits than they are guaranteed now, and pass on their account TO AN INSURANCE COMPANY:

"they would not be able to withdraw money from their account to such a degree that by doing so they would move themselves below the poverty line. In other words, there would have to be a sufficient amount coming to them, in terms of a monthly inflation index benefit stream, from the traditional system and the annuitized portion of their personal account to be able to fund a poverty-level benefit. Now, to the extent that their personal account enables them to have total benefits that are higher than that, they would have flexibility over the disposition of those funds."

See "HEADS UP: Embargoed White House Social Security briefing", at http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x3046059 and also see http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1560924 .

[kerrygoddess]

12. Thanks for the link to those threads!