About That Secret Soc Security Plan

As at least one commenter to Nick's earlier post notes, the story which laid out a Bush plan to confiscate the market gains of private SocSer accounts has been corrected. Turns out that government money grab will not happen.

I admit that my original read of the story left me so confused that I gave up trying to make sense of the story. If the private accounts were a sham, what exactly was the point of Bush proposing them? Yucks and giggles?

The story is still very murky and probably would've never seen the light of day in its current form. All it tells us is that Social Security benefits will continue to have a means-testing element to them even after the program is "reformed." No kidding.

Me, I'm going to stop reading Social Security reform stories until some actual legislation is introduced or Treasury announces it is going to restructure the way it issues debt in preparation for a new class of government bond. The crap is just getting too deep.

Comments

[saw-whet]

But, Jeff, aren't you journalists supposed to be the Palladium for us wee citizens? Aren't only the wisest and most true of heart chosen to be bloggers? Getting deep indeed. Put on those hip boots and protect us!

[D Anghelone]

...or Treasury announces it is going to restructure the way it issues debt in preparation for a new class of government bond.

That would complete the circle. Other than "ownership" wouldn't we be about where we are?

[joe]

"Me, I'm going to stop reading Social Security reform stories until some actual legislation is introduced or Treasury announces it is going to restructure the way it issues debt in preparation for a new class of government bond."

Yeah, sure you will. You can quit any time you want.

[kuros]

i am beginning to think it is all smoke and mirrors
and what happened to the "war" on steroids abuse and the electrical grid system that is ready to blow again? oh and lets not forget the hydrogen car plan
hmmmmm

[Gunnar Hegel]

Hit and Rungate! What watchdog group will blogosphere the blogosphere?!

[Isaac Bartram]

Me, I'm going to stop reading Social Security reform stories until some actual legislation is introduced.....

But, Jeff, how will you know if you don't read the stories?

[Anonymous]

Isaac Bartram at February 3, 2005 05:30 PMBut, Me, I'm going to stop reading Social Security reform stories until some actual legislation is introduced.....

But, Jeff, how will you know if you don't read the stories?

sometimes you people just make me lol!!!!!

[Ruthless]

Women and journalists, regardless of gender, are innumerate.
I hate for my puny computer to venture into the Washington Post cyber minefield, but I wanted to try to get it straight. I did take the chance, but as for getting it straight: fuggetuboutit.
Why is three percent assumed to be what Social Security recipients would get on what they and their employers paid in? I thought the latest was closer to one percent.
Here's the key point, and it has nothing to do with innumeracy:
Is the worker's account the worker's account or the governments?
Recall the Bush's fondness for labeling the Laffer Curve Voodoo economics.
Dubya is a Yalie at heart. He can't grasp what is near and dear to a Scots-Irish heart he pretends to have.
Whose money is it?
Whose body is it, when it comes to the war on drugs.
Face it. Dubya is nothing but Al Gore, except a better actor.

[ed]

The Post might have corrected it, but Senior Administration Officials are still on record as having said it.

http://www.talkingpointsmemo.com/archives/week_2005_01_30.php#004645

Q Putting those aside, what is the revenue implication of a fully phased-in 4 percent account of the type that you've laid out?

SENIOR ADMINISTRATION OFFICIAL: It would be very different depending overall on whether or not it was done alone or in the context of a comprehensive plan.

Q Assuming it's done alone, since that's all you're putting out here --

SENIOR ADMINISTRATION OFFICIAL: And the problem with assuming it's done alone is that we aren't advocating that it be done alone. We're advocating that it be done in the context of a comprehensive plan.

Q But people are going to want to know what is the cost.

Q But you're not saying what else is in there. You're not saying what else is in the comprehensive plan, so --

SENIOR ADMINISTRATION OFFICIAL: Well, when we have -- at the point where we can attach numbers to a comprehensive plan and model the effects of the accounts in that context, of course we'll put those numbers forward. But until that -- those specifications exist, we don't have the ability to project that.

Q In saying that there is no net added cost to the program, are you implying -- is it implicit that there is a benefit offset of one-third current guaranteed benefit because you're diverting one-third of revenues away from this program? If that's not correct, what would the benefit offset be to traditional benefits, and how would it be calculated?

SENIOR ADMINISTRATION OFFICIAL: The way that the election is put before the individual in a personal account structure of this type is that in return for the opportunity to get the benefits from the personal account, the person foregoes a certain amount of benefits from the traditional system.

Now, the way that election is structured, the person comes out ahead if their personal account exceeds a 3 percent real rate of return, which is the rate of return that the trust fund bonds receive. So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent real rate of return. To the extent that his personal account gets a higher rate of return, his net benefit would increase as a consequence of making that decision.

Q So he would only get a benefit to the extent that his portfolio performed in excess of 3 percent?

SENIOR ADMINISTRATION OFFICIAL: Right. You can think of it as saying -- if you were making a decision on where to put your money going forward over the next 10 years, and you're saying, should I put it in this account or that account, if you're choosing to put your money over here instead of over here, then the net effect on you, as an individual, is to compare what would be the rate of return you get from this system, as opposed to putting it over here. And that would be the difference between the two.

Q Short of 3 percent, would he make whole or would he get less than the current guaranteed benefit?

SENIOR ADMINISTRATION OFFICIAL: Well, there's a implication at the end of your question which -- you have to remember, the current system can't pay the current guaranteed benefit, so --

Q -- is to be paid through 2042 or 2052, the point -- are you suggesting that would not be paid?

SENIOR ADMINISTRATION OFFICIAL: Well, it's -- well, actually, it's -- I don't want to get off on too far of a tangent, but the Congressional Budget Office actually put out a paper this week which made a modification to what they had previously said about what current law was. And they made it very clear that current law is actually the level of benefits the current system can actually pay, as opposed to the level of benefits the current system is promising. So if you ask the question in terms of --

Q But they also said it can pay current level benefits until 2052 -- correct?

SENIOR ADMINISTRATION OFFICIAL: But the Congressional Budget Office is also very careful to say that starting in 2019 or 2020, the resources are not there to pay those benefits.

[Warren]

...until some actual legislation is introduced...

You mean at 2:00am, fifteen minutes before it's passed?

[Gilbert Martin]

"SENIOR ADMINISTRATION OFFICIAL: The way that the election is put before the individual in a personal account structure of this type is that in return for the opportunity to get the benefits from the personal account, the person foregoes a certain amount of benefits from the traditional system."

Which is not the same thing as "confiscating all the market gains" from the private accounts as it was characterized above.

Nothing would be confiscated from the private accounts. The account holders would simply have to earn more than 3% rate of return to come out ahead of not having the account in the first place.

Of course in reality the individual would probably come out ahead anyway, since the 3% return threshold used for return on traditional SS benefits is predicated on current benefit formulas - which are sure to be changed (i.e reduced) in the future.