Burnt Orange Report

One more on Social Security tonight

By Nathan Nance

Guest post by Nate Nance

Since I was so pleased by the Times' editorial, I guess I was just asking for a letdown with the Washington Post's story on the proposed plans for price indexing and private accounts.

Essentially, the first step in the partial-privatization plan is to index the benefits payouts to prices instead of wages. Since wages rise faster than prices, it would save tons of money. It also means that anyone who retires halfway through this century will get about 54% of what is currently promised. Even the Trustees say that doing nothing means you get 70% in 2042.

The whole point of this change in indexing is, of course, to make you have no choice other than to invest in a private account. Fifty years from now, you can't possibly retire on 54% of what is promised by Social Security.

I know some of us will say that the return from the private accounts will make up for the shortfall. The article has this little nugget buried in it that sums up why this is all a very bad idea.

"If this was a case of just price indexing and doing nothing else, frankly, some of the [opponents'] charges are pretty valid," John said. "But if you give the personal accounts as well, you're giving people the opportunity to make up the difference. Not everyone will do that, but a substantial number will."

Even they are telling you that not everyone is going to come out ahead on this, and I'm sure plenty of economists will agree that the "substantial number will" claim is dubious at best. I'm all for investing in the market, that's what 401ks are for. That's what pensions are for. It's not what Social Security is for.

Some people may do really well and retire with plenty of money in their golden years with this plan. But a great number of people will not. They will retire with nothing to show for the years of hard work, let alone enough to pass on to grandchildren like the $40 million dollar ad campaign to come promises them. No, fundamentally changing a safety net program so that a few will retire with plenty while others have to pay for it is immoral and it is wrong. We can't let that happen.

This is a guest post from Nathan Nance. He can be reached at nate_nance@yahoo.com.