The 'Surprise' Claim

[travelinman]

The 'Surprise' Claim

Campaigning during services at Mt. Olivet Baptist Church on Sunday, Kerry warned parishioners that Bush would hurt seniors by privatizing Social Security.

"Higher gas costs, with family budgets that are already stretched to the limit ? you know what I am talking about. The last thing seniors need in America is the president's January surprise. That's a surprise we can all live without," he told the mostly African American congregation.

In a written statement, the Massachusetts senator added on to the sentiment.

"This might be a good surprise for the wealthy and well-connected, but it's a disaster for America's middle class. The president's privatization plan for Social Security is another way of saying to our seniors that the promise of security will be broken," Kerry said.

Kerry based his remarks on a line in a report in the New York Times Magazine by Ron Suskind. In that, Bush is quoted saying to a meeting of major contributors: "I'm going to come out strong after my swearing-in with fundamental tax reform, tort reform, privatizing of Social Security."

Bush's plan to allow personal savings accounts is nothing new, but it led to Democrats' hitting Bush for his "January surprise," which they say will cause economic hardship for seniors who will be set up to lose 30-45 percent of their benefits.

The Bush campaign was quick to call the quote in the magazine a "total fabrication" by Suskind, whom Republican National Committee Chairman Ed Gillespie revealed is "a registered Democrat."

Bush campaign spokesman Steve Schmidt said Kerry's trying to call the president's plan a "privatization" scheme shows that Kerry "will do anything for political gain."

"Today, we saw another example of Kerry's willingness to say anything, as he took a false attack on the president as an opportunity to scare America's seniors," Schmidt said.

But that wasn't enough for the Bush campaign, which has been burned by Suskind before ? both when he quoted former Bush Faith-Based Initiatives office chief John DiIulio and former Treasury Secretary Paul O'Neill, whose recent tell-all tome Suskind transcribed.

The Bush-Cheney '04 campaign sent out a long list of reports on Suskind's brand of journalism, which has been described by his detractors as inaccurate, destructive, antagonistic and "largely based on anonymous sources and second-hand reports."

Suskind was also torn apart for being light on written notes and not using any electronic equipment to make sure he gets his statements right. In June 2002, after a Suskind report quoted DiIulio criticizing the administration, DiIulio later denied having said what was attributed to him. The White House press secretary at the time told reporters, "We're taking up a collection to buy the author a tape recorder."

The Bush defense also said that "privatization" and allowing younger workers to invest their Social Security payments into various stock and bond options are not the same thing, and that the president has already promised seniors that their benefits will not be affected by efforts to perpetuate the program. It added that the Kerry camp is using semantics designed to scare senior citizens.

web page

[travelinman]

Privatizing Social Security
Thomas Sowell



September 28, 2004

Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security.

No matter what you were promised or at what age you were supposed to get it, the government can always pass a new law that changes all of that. But you still have to pay into the system.

A private annuity plan run by an insurance company is legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem its promises.

One of the few issues on which Senator John Kerry has taken a stand and not changed it (yet) is Social Security. He has said: "I will not privatize Social Security."

This has long been the position of liberal Democrats, and John Kerry's voting record in the Senate makes him one of the very few Senators more liberal than Ted Kennedy. That is the ranking given by Americans for Democratic Action, a leading liberal organization that ought to know.

Why are liberals against letting people put part of their Social Security payments into private investments?

Risk is one of their arguments. Al Gore incessantly repeated the phrase "a risky scheme" during the 2000 election campaign and risk still seems to be the big objection to letting people put their own money where they want.

Some liberals may actually believe that politicians know what is best for you better than you know yourself. That is, after all, the philosophy behind many other government programs.

Another reason for liberal opposition to private investment of Social Security payments is that it deprives them of control of billions of dollars that they have been spending from the Social Security trust fund for years. They can buy a lot of votes with all sorts of giveaway programs, financed by money taken from Social Security.


web page

[travelinman]

A Plan For Privatizing Social Security
by Peter J. Ferrara

Peter Ferrara is general counsel and chief economist at Americans for Tax Reform and an Associate Scholar of the Cato Institute.


--------------------------------------------------------------------------------

Executive Summary

As Social Security?s problems become more apparent, there is growing support for the concept of privatizing the retirement program. As the debate grows it becomes more important to move beyond generalizations and provide detailed proposals for how such privatization can be accomplished. Without endorsing any specific proposal, the Cato Project on Social Security Privatization will present a number of possible privatization scenarios.

In this study, Peter Ferrara offers a proposal based on the following key elements:

Current workers could be free to choose either the private option or Social Security. For those who choose the private plan, workers and employers will each pay 5 percent of wages, instead of the current Social Security payroll tax of 6.2 percent for each, into private investment accounts, resulting in an eventual payroll tax cut of 20 percent. Besides supporting retirement benefits, the accounts would finance private life and disability insurance, thus replacing Social Security survivors and disability benefits.


Workers who opt out of the current Social Security system would receive recognition bonds from the federal government that would pay them a proportion of future Social Security benefits equal to the proportion of lifetime taxes they had already paid.


Benefits promised to current retirees would be paid in full, with no reduction of any kind.
The biggest objection to privatizing Social Security has been the transition to a privatized system. But the projections of the fiscal impact of the plan offered in this study show that the transition can be financed without new taxes and without cutting benefits for today?s recipients.

Indeed, the yearly transition deficit would be offset after about 14 years. After that, the privatization reform actually starts producing a surplus for the federal government. About 20 years after the reform is begun, that surplus would be large enough in 1996 dollars to eliminate completely a federal deficit as large as today?s.

These projections place the transition in a whole new perspective. They show that the transition is financially feasible and manageable, and that modest short-term sacrifices would lead to long-term surpluses that would ultimately reduce the federal budget deficit.

web page

[travelinman]

Privatizing Social Security: A Big Boost for the Poor
by Michael Tanner

Michael Tanner is director of health and welfare studies at the Cato Institute.


--------------------------------------------------------------------------------

Executive Summary

Critics of Social Security privatization often warn that such proposals hold serious dangers for the elderly poor. However, a closer examination of the evidence indicates that the poor would be among those who would gain most from the privatization of Social Security.

By providing a much higher rate of return, privatization would raise the incomes of those elderly retirees who are most in need. Although the current Social Security system is ostensibly designed to be progressive, transferring wealth to the elderly poor, the system actually contains many inequities that leave the poor at a disadvantage. For instance, the low-income elderly are much more likely than their wealthy counterparts to be dependent on Social Security benefits for most or all of their retirement income. But despite a progressive benefit structure, Social Security benefits are inadequate for the elderly poor's retirement needs.

In addition, the progressivity of Social Security is undermined by differences in life expectancy. Because the wealthy generally live longer than the poor, they receive more total Social Security payments over the course of their lifetimes. In a privatized system, an individual's benefits would not be dependent on life expectancy. Individuals would have a property right in their benefits. Any benefits remaining at their deaths would become part of their estates, inherited by their heirs.

Finally, Social Security drains capital from the poorest areas of the country, leaving less money available for new investment and job creation. Privatization would increase national savings and provide a new pool of capital for investment that would be particularly beneficial to the poor.

For those reasons, Social Security privatization should be viewed as a big boost to America's poor.

web page