Social Insecurity III

See if the following makes sense to you. Bush™ says there’s a Social Security crisis: eventually, the system’s going into the red because of the high aging population of the baby boomers. They propose to address this crisis by subsidizing the creation of private personal accounts with ginormous amounts of cash borrowed from other sources (China and Japan?). The gov’t will have to borrow the money to cover the costs of current retirees. Bush™ says this will put money directly into the hands of future retirees, letting them invest in stocks and bonds. Gov't regulated ones, of course: “There will be a prescribed mix of conservative stocks and bonds into which you can invest, similar to the employee thrift plan at the federal government level.”

What’s so strange about this is that it doesn’t address the crisis at all. It might even deepen it. Does the Bush Administration really want to foster “personal responsibility” over retirement funds (as if many people don’t already have these)? Do they want to create an Ownership Society®? If they did, they could start by cutting payroll taxes, the source of current SS benefits. If they took less of our money, we’d have more of it—and we’d have to take responsibility for it and not “go to the race track. (Applause.) Or take it to the lottery.” Unfortunately, the gov't would have to borrow money to cover the benefits of current retirees.

It's probably going to end up borrowing money anyway, just to pay for the Treasury bonds (“full faith and credit of the United States,” etc.) that make up the surplus in the SS trust fund--an ironic name if there ever was one. But Bush™’s plan would require borrowing even more, to cover the percentage diverted into stocks and bonds. Never mind that the rest of the world is already concerned about the third-world amount of debt we're accruing and the anemia of the dollar.

What’s the real agenda here? It may be, as Bill Kristol has said, to “create Republicans” by making us common folk investors through letting us sock away a measly amount of cash per annum that won’t add up to any more than what retirees get now. (Even if it did, it wouldn’t add up to much more, unless the stock market was irrationally exuberant for decades.) But I suspect something else is on the administration’s mind. Maybe they want to divert money into capital markets. Or maybe they want to phase out Social Security itself by forcing the gov't into a fiscal crisis years down the road.

Discuss.

UPDATE: Josh Marshall, who's been tracking congressional support and dissent on the SS mess, has an extensive review of the President's plan here.