Wednesday, February 23, 2005

Personal Hardware

A New York Times editorial gives us the basics of Bush’s “personal” retirement account plans. The short version is that the plan is hoping you’ll die very soon after you retire.

Under the president’s proposal, when you retired, your traditional Social Security retirement benefit would be cut by an amount equal to all the deposits you had made into your private account plus interest. (The interest would be three percentage points higher than the rate of inflation.) The benefit cut would be each person’s contribution to repaying the huge debt the Bush administration would take on to “pay for” privatization.

But if you died before you retired, you would have already used some of that borrowed money to set up the private account and yet would never have made any contribution to repaying the debt. So in that case, how would the government recoup your share of the amount it had borrowed? Well, it could let your share of the debt go unpaid – in effect bequeathing to your heirs and their fellow citizens ever-higher deficits. Or your spouse could inherit your private account and the benefit cut that went with it. Or the government could take its cut from your private account before the money went to your survivors – a grab that could wipe out your stash.

Those may be the nuts and bolts of the plan, but you and your heirs are the ones getting screwed.

Even Charles Krauthammer thinks Bush’s Social Security plan is bogus. How nutty does it have to be to get him off the reservation?