So many of the young people on this website are going to be adversely affected if shrubito's plan gets marketed. Yet, I have seen little interest in the posts that have made it here.
Here are some snippets from an article that prepared me well enough to take on my representative at a recent repuke-friendly Town Hall meeting. With the shrub doing his best to market private accounts (which may not necessarily be a bad thing if they could only truly be private), young people need to be steamrolling against his plan for many other reasons.
The plan Bush is proposing is very similar to the plan tried in Great Britain. In an interview with the BBC, one participant said of the plan, "We would have done better to have put our money under our mattress," citing the private account maintenance fees and attendant fluctuations in the market and a resulting overall 30% decrease in benefits.
Here are some excerpts from Allan Sloan's recent Newsweek article written in lay terms. For the full text, click on the link.
http://www.msnbc.msn.com/id/6920720/site/newsweek/ Key points under the Bush Plan (from the article above):
Bush is pretending Social Security's about to collapse and go broke, which isn't true. The Dems are telling you that it can continue as is for more than 30 years without a problem—and that's not true, either.
. . .
An average worker retiring in 2075, for instance, would get a benefit 46 percent below the current formula. Later cuts would be even deeper. The plan does this by using a benefit formula based on inflation rather than on wages, which are roughly 1 percent a year higher. **If you get a 20% raise one year, you SS contribution would be based on the current inflation rate, rather than your increased wages. This was already tried in Great Britain and failed.**
. . .
Shifting to private accounts, under Bush's plan, would lead to massive borrowing by the federal government, adding to our already huge deficits. Over the first 20 years, borrowings would total $4.5 trillion.
Given that foreigners are financing almost all our budget deficit, we'd be hocking ourselves even more to lenders—such as the central banks of Japan and China—whose long-term interests may not be the same as ours.. . .
You would own the account, sort of, but you wouldn't control it. And you'd have to fork over the 3 percent return—by taking a smaller benefit—when you cash in your account.
. . .
When it's retirement time, low-income people would likely have to convert most or all of their private account into an annuity to have enough money to live on, or to meet requirements that their guaranteed benefit plus annuity income would exceed certain levels.
. . .
Although stocks tend to rise over the long term, you'd have to cash in some or all of your retirement account to buy an annuity when you retire.
That puts you at the mercy of events. Consider the following, produced by the Center on Budget and Policy Priorities. Say you retired in March of 2000, with a private account that held $100,000 of stock in an SP 500 Index fund. (Index funds match the performance of a benchmark; they don't try to beat the market.) Your inflation-adjusted annuity would have been $7,558 a year—about $630 a month—by the center's calculation. But if you had the same number of shares in your account and instead retired in October of 2002, your account would have had less than $60,000 in it. Your annuity: $3,352 a year, or $279 a month.. . .
Understanding the complexities of this issue can seem daunting, but, hell, even I got somewhat of a grip on it.
A straightforward solution could be to raise the current payroll tax by less than 2 percentage points or cut benefits by 13 percent. Either would solve the problem through 2080. Similarly, if the limit on wages taxed for Social Security, currently $90,000, were lifted altogether, the system would be kept fully solvent until 2077, according to the Social Security Administration's chief actuary. (But what would the superearners say about that?)
My own personal solution? Give me more leeway with my 401(k). Now that is a real private account that I can take responsibility for.
And, my dear young DU'ers, I'm not the one who is going to get the short end of this stick, because I'm just too old.