Saturday, February 12, 2005

J: Over the past few months, we have been tracking and writing about the Presidents scheme to detonate Social Security. One of the problems with writing about one of the Administrations policy objectives is that they rarely release details of any of their plans without their paid monkeys in the media floating trial balloons through talk radio and the pundit shows. That way, if something proves unpopular, it can be jettisoned or slightly tweeaked so they can name it something else, and proclaim the critic liars and delusional. So it was with great anticipation the Administration provided some details of their plan, such as it is.

Well wireheads, shock and awe, it is actually more temple throbbing insane than even we, the jaded oracles and seers at the mojowire allowed ourselves to suspect. Lets lay out some of the key components. Here is Peter Orzag from the Brooking Institution testifying before congress about the plan:

“Under the Administration’s plan, payroll taxes deposited into an individual account are essentially a loan from the government to the worker. The Administration’s proposal is the equivalent of a loan that mortgages future Social Security benefits: Workers opting to divert payroll taxes into an account today would pay back those funds, plus interest, through reductions in Social Security benefits at retirement. In other words, just as with a loan, the worker receives cash up front and then owes money back, with interest, later. Someone who borrows money to make an investment benefits if the assets purchased with the borrowed funds grow faster than the debt; the person is worse off if the debt grows faster than the investment. Similarly, under the Administration’s plan, workers wind up with higher retirement income if the income from their accounts exceeds the benefit reductions that pay off the loan, and vice versa. “

So, instead of the current system, where you divert some of your paycheck into the trust fund, which is used to purchase the most secure investment instrument on earth, a U.S. Bond, which earns a respectable 3.5 percent or so per year, under the bush plan, the government will stake you so you can invest in more risky investments. They will deduct their stake when you begin collecting benefits. If you made a few bad choices and were unable to make enough to cover the initial stake, too bad for you commie. How can anyone who lived through the stock market devaluation at the end of the boom want to risk their retirement on this scheme? How much GOP Kool-Aid do you have to imbibe from watching Fox News does it take before this scheme starts making sense?

It gets even better. More Mr. Orzag:

“The accounts not only fail to reduce the Social Security deficit, but will likely increase it. Even an Administration official has acknowledged that the accounts proposed by the President would have a “net neutral effect” on Social Security’s financial condition over the long term. The reality is likely to be even worse, however: The accounts will likely harm Social Security’s long-term deficit. The reason is that not all the “loans” from diverted revenue will be repaid in full; in several situations, which I will describe below, subsequent benefit reductions will be insufficient to offset the cost of the diverted revenue plus interest. As a result, even over the “infinite horizon” that the Administration favors, the accounts not only fail to reduce the deficit in Social Security; they make it worse. Over the traditional 75-year horizon used to evaluate Social Security solvency, this conclusion is only strengthened. “

Let me get this straight. At best, their plan does nothing to address the alleged solvency problem. At worst, it will make the fund less solvent. Wow, fella’s that’s quite a scheme you’ve got there. You go to the effort to conjure up a fake crisis by rigging the numbers and having your worthless mouthpieces pimp it, then, when your grand scheme finally sees the light of the day, it doesn’t even address the crisis you went to so much trouble to manufacture. Essentially, your fake solution doesn’t even address their fake crisis. Can you people possibly get more pathetic? ...

S : Wait..what’s that Mr. Orzag, the can get more pathetic...tell us:

“The accounts by themselves entail a significant and sustained increase in public debt. By themselves, the individual accounts would increase public debt by more than $1 trillion during the first decade they were in effect and by more than $3.5 trillion during their second decade. The increase in public debt, moreover, would be permanent: Even if each individual “loan” were eventually repaid in full, public debt would remain higher than in the absence of the accounts over the long term. The reason is that even if each loan were eventually repaid, some loans will always be outstanding. As a result, the government will never, at any point in time, yet have been paid back for all the revenue diverted into accounts – and therefore public debt will always be higher than without the accounts. The bottom line is that the Administration’s account proposal would raise public debt by more than 30 percent of GDP over the very long term. And even if the account proposal were combined with other measures that (unlike the accounts) would reduce the deficit in Social Security, public debt would remain higher than in the absence of the plan for several decades. Such higher levels of public debt are problematic because they increase the exposure of the government to a collapse in financial market confidence. “

JEEBUS! So the President wants to make his awful debt crisis even worse, by borrowing over 3 and a half Trillion, That’s Trillion with a T suckers, and that debt ,even with the supposed payback when people retire, will not be paid in full and will make the finances of the Federal government more exposed in case of an economic crisis. The question you need to ask yourself is why? Why make up a fake crisis, an even worse solution, and put the Governments finances in even worse shape than.

Now that’s the 64,000 dollar question. Part of the answer is ideology. The New Deal, yes the New Deal from the 30’s so sticks in the craw of the Right wing Nutjobs that have hijacked the Government that they would literally blow the economic future of the country up in smoke than allow Social Security to continue succesfully, and thus affirm the policies and ideas that underlay the New Deal. That really takes idealogical warfare to a whole other level. Does even Facist really cover it? Is there a word that can sum up a the right combination of Hubris, arrogance and the downright hatred of humanity it takes to come up with a scheme like this? Suggestions welcome Wireheads...

Think we’re done...Nope..Mr. Orzag delivers the punchline of the plan:

The Administration’s ultimate plan will have to rely on severe benefit reductions to eliminate the Social Security deficit. Since by the Administration’s own admission the accounts do not reduce Social Security’s deficit, and since the Administration is opposed to dedicating additional payroll taxes to the program, the Administration’s plan to eliminate the long-term deficit in Social Security must involve severe reductions in benefits (or introduce some new revenue source for the program). In particular, any plan that closes the deficit, includes the accounts the Administration has already proposed, and fails to dedicate additional revenue to Social Security must involve substantial cuts in traditional benefits beyond those required to pay back the loans to workers opting for individual accounts. The combined effect would be a stunning decline in the defined benefit component of Social Security over time. For example, if one prominent type of benefit reduction (often referred to as “price indexation”) were combined with the loan repayments necessary under the Administration’s accounts, traditional benefits for a young average earner today could decline drastically – instead of replacing more than a third of the worker’s previous wages, Social Security’s defined benefits would replace well under a tenth.

Ahhh...there’s the rub. Nothing in this plan will improve the solvency of the program, it will only make them worse. Ultimately, if the Adminitrations dire predictions of doom for SS were to come to pass, this plan would make this so bad that benefits to workers would be drastically cut.

You know, this was all really complicated, but at it’s heart, the Administations plan for SS is basically like all their other economic schemes. Workers get screwed. Corporations and the GOP’s wealthy contributors get even wealthier. That is the end result of every Bush plan. Once Again Red State voter, you have really outdone yourself. Outstanding work on this one. Thank you for electing the monkey who is trying to destroy not only my Social Security benefit, but countries economy and finances as well. But hey, it’s all about the freedom and the liberty right?

Insert quotation here.

Insert the vengeful, apocalyptic wrath of the space-God Jehovah-1 here.

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