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Monday, February 28, 2005

Star Tribune takes on social security

Posted by: Hammer / 11:46 AM

After spending many paragraphs explaining how the Minnesota congressional delegation is addressing the Republican plan to borrow $15 trillion in order to privatize Social Security (which turns out to be a whole lot of nothing), reporter Kevin Diaz gives us this:
Democrats contend the Bush plan, which they call privatization, would do nothing to solve the retirement system's fiscal shortfalls, and instead would lead to massive borrowing to pay the benefits that are due at the same time that Social Security tax revenue is diverted to the personal accounts of future retirees. They also argue that the leading plan floated so far would cut Social Security benefits as much as 50 percent by linking them to price increases, rather than wage increases as they are now.
Democrats call the Bush plan privatization because that's what it is; Republicans don't like the word because it accurately describes their scheme. Find an accurate word or phrase and use it.

One more point -- when the Democrats make a contention and the Republicans don't dispute it, you can drop the "Democrats contend" part and get right to the fact. Social Security privatization does nothing to improve the Social Security shortfall. It's confusing, I know, because Bush pretends the two are related. But in an extensive background briefing, the question came up time and again, with one clear answer:

Q How do the personal accounts guarantee permanent solvency for Social Security?

SR. ADMIN. OFFICIAL: Well, we talked about the personal accounts being in the context of an overall plan to create a permanently solvent Social Security system. What I've laid out here are details of the administrative structure of the personal accounts. The larger question of the comprehensive plan to fix Social Security permanently is really subject to the details of discussions between the President and members of Congress.


Q Can you just clarify whether or not this does address the "crisis," or is this -- are we correct in reporting if you say this is neutral and yet to be decided as to how you'll basically come up with the money to solve the "crisis"?

SR. ADMIN. OFFICIAL: The President is going to talk about the need to take action to fix Social Security. We're not making representation that the personal accounts alone are fixing the system's finances.

Q Are they helping at all?

SR. ADMIN. OFFICIAL: The personal accounts help in the sense that the personal accounts enable the worker to be better off in the context of a plan to fix Social Security. You could, in theory, fix Social Security finances without a personal account and then the worker would be far worse off than if you offered the personal account. So it's an important part of the overall plan to fix Social Security, because it's an important part of having a plan that, in the end, treats workers well.


Q But is it fair to say that when everybody wakes up tomorrow morning, the President is not going to have given them an answer tonight about the $3.7 trillion shortfall, and that presumably, since he's ruled out higher taxes, that the deal that he goes along with is going to have to come up with $3.7 trillion worth of benefit cuts?

SR. ADMIN. OFFICIAL: Well, I'm not sure I would categorize it that way. First of all, the current system is promising benefits that are much, much higher in real terms than the future is now. So we can certainly say that no one's benefits today need to be changed; no one near retirement, their benefits don't need to be changed; and people in the future can get benefits that are at least as high as people are getting today. Beyond that, we're leaving it open to discussions with Congress as to how to fill that $3.7 trillion -- actually, what we think is a $10.4 trillion hole.

The nut is at the end. The administration says there is a $10 trillion hole in Social Security and their plan does nothing to fill it.


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