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Bush's
Social Security plan waiting to destruct
Social
Security is a financial train wreck waiting
to happen, and President George W. Bush
has a plan to save it. What are the details
of the president's plan and how will it
affect the government's enormous budget
shortfall?
There
is the common misconception that under the
president's plan for Social Security, individual
payees will have the freedom to play the
stock market, buying and selling at whim.
In reality, Bush's plan calls for individual
accounts that will be managed by financial
professionals, who are coincidentally major
contributors to the Bush campaign. There
will be a number of options available with
a varied degree of risk/reward potential.
The one thing they will all have in common
is the enormous cost levied upon them by
funds managers.
Currently,
12 percent of an individual's paycheck is
deducted in order to finance Social Security
benefits for the elderly and to enlarge
the Social Security trust fund. The trust
fund is currently valued at around $1.5
trillion, and was started in 1983 in order
to protect against future shortfalls and
shifting demographics.
Bush's
plan would take one-third of the current
payroll taxes and place it in private accounts.
This measure would cost around $4.5 trillion
over the next 20 years. In a sense, it is
like borrowing on margin in order to invest
in stocks.
This
amount, 4.5 trillion dollars is a little
over half of the national debt, and it is
hard to believe that Bush's plan would leave
governmental balances in the black. What
is hoped for in the plan is unending growth
in the stock market. That is certainly unrealistic
as infinite growth is not possible within
the confines of a closed system with limited
resources (ie: America, the world). That
brings up the insanity of the global economy
that is predicated on somehow sustaining
infinite growth with a very visible limit
upon available resources to fuel said growth.
Returning
to Bush's proposal, it is quite clear that
Wall Street will benefit from a sudden infusion
of cash provided by private investment accounts.
This will probably create a temporary boom
in the economy, increasing the size of the
already enormous bubble that is waiting
to burst. It's hard to estimate the amount
of damage that Bush's proposal will do.
It will certainly mean a draconian cut in
benefits for many of the "values voters"
who put the president in office. Increasing
the size of the national debt by 50 percent
will undoubtedly cause interest rates to
rise, and could seriously harm the American
economy.
There
are other ways to mend Social Security without
undermining the entire system. Since Republicans
are morally repulsed by the idea of entitlement
programs that don't benefit the rich and
powerful these solutions are not even being
considered. Removing the cap on taxable
income for Social Security, which is currently
$90,000, would go a long way towards making
benefits available to the next generation
of retirees. Rescinding Bush's senseless
tax cuts for the rich would also do the
trick.
In
short, there are better solutions to the
Social Security problem, but they are not
being considered because the incumbents
would rather bankrupt the system than save
it.
Sterling
Harris is a history major at CSULB.
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