Senate Privatization Plan DOA

Senate Privatization Plan DOA

Senate conservatives are introducing a bill that would divert surplus Social Security funds into private accounts. Like the president’s privatization scheme, the Senate blueprint is a path towards dismantling Social Security rather than saving the successful program. The new privatization plan would require hefty tax increases, massive program cuts or huge amounts of new debt. It does nothing to improve the solvency of Social Security and will actually make matters worse. Like other ideas for dismantling Social Security, this one should be dead on arrival.

• The Senate privatization plan would explode the federal deficit at a time when we can ill afford massive new debt. The Wall Street Journal claims that the Senate proposal (which it calls "political jujitsu") would "create no new debt for the government." This is flatly untrue. Right now, money that is collected from Social Security payroll taxes that is not needed to pay current Social Security benefits is used to pay for other government programs. Absent an accompanying package of tax hikes or program cuts, the new privatization plan would divert all of those funds to private accounts and make our current deficit problems much worse. By 2009, the new plan would add an additional $230 billion to the federal deficit.
  
  
• The Senate privatization plan would weaken Social Security and threaten long term benefits for retirees. The new privatization plan would also weaken traditional Social Security by raiding the Social Security trust fund. Under the current system, when surplus Social Security funds are spent on other programs, the government creates a binding obligation to repay the money at a later date. Because of this trust fund, the government will be able to pay Social Security benefits at current levels until at least 2052. The new privatization plan would eliminate all future contributions to the trust fund, undermining the program's long-term solvency. If the program becomes insolvent, the government will be forced to make deep cuts in guaranteed benefits.
  
  
• The Senate privatization plan is just a ruse for replacing guaranteed Social Security benefits with unproven private accounts. The use of the Social Security surplus to fund private accounts is just a gimmick. The real goal remains the same: diverting payroll taxes from guaranteed Social Security benefits to private accounts. Co-sponsor Jim DeMint of South Carolina explicitly told the Wall Street Journal that if his plan was enacted into law "Congress would be compelled to find a way...to ensure their continuation after payroll tax surpluses dried up." In straight forward terms this means diverting money from Social Security payroll taxes, further eroding the guaranteed benefit.