Tuesday :: Jan 4, 2005

The Alternative Social Security Plan Democrats Need To Push As Part Of Their Second Term Agenda


by Steve

As we have already seen, there will be much disinformation, distortion, and outright lies by Republicans and George W. Bush in selling their Social Security privatization plan. What you need to know is that there are at least three alternatives for how to proceed with Social Security: do nothing, allow Bush to privatize and cripple the country with trillions in new debt to cover transition costs, or pursue a third alternative which fixes the system’s funding problems without Bush’s privatization while providing a higher level of benefits over the next 75 years than Bush’s plan. This plan was authored by Peter R. Orszag of the Brookings Institution and Peter A. Diamond of the Massachusetts Institute of Technology over a year ago, and can be found here, and here.

The Center on Budget and Policy Priorities (CBPP) did a summary comparison of these three options and released the results today, while pointing out recent deceptions by outgoing Idaho GOP Senator Larry Craig in his inaccurate assessment of a CBO study of the Orszag-Diamond plan.

This is what the CBPP had to say about the findings from the CBO. Bush's plan is referred to as the Commission plan.

•CBO examined benefit levels for workers who will retire in future decades under the Commission plan, the Diamond-Orszag plan, the current benefit structure, and a scenario under which no action is taken and benefits ultimately must be reduced to match available revenue. CBO found that benefits for future retirees under the Commission plan, including the benefits from the plan’s individual accounts, would be much lower than the benefits paid under any of the other approaches.

•The benefits that would be paid under the Diamond-Orszag plan would be substantially higher than those that would be paid under a “do nothing” scenario once Social Security’s reserves were exhausted. By contrast, the benefits paid under the Commission plan, including the income from individual accounts, would be lower than the benefits provided under the do-nothing scenario.

•CBO found that the Commission plan would result in deep benefit reductions, even when the income from the plan’s private accounts is included.

Again, these are the findings of the CBO. How can a Democrat vote for Bush's plan when the CBO clearly states that it is inferior to the Orszag-Diamond plan, or even to doing nothing, unless those Democrats are being bought off with Wall Street money?

It should also be pointed out once again that Bush is manufacturing a crisis in Social Security, claiming a fiscal problem in future years that is dwarfed by the far larger deficits caused by his own tax cuts and his Medicare fiasco.

•The Social Security and Medicare Trustees, a majority of whom are members of the President’s cabinet, project that the Social Security shortfall will amount to 0.7 percent of the Gross Domestic Product (the basic measure of the size of the U.S. economy) over the next 75 years. In dollar terms, the Trustees project the shortfall over the 75 year period at $3.7 trillion.

•The Trustees also project the cost of the Medicare drug benefit at 1.4 percent of GDP — or $8.1 trillion — over the same period. This is at least double the size of the Social Security shortfall.

•Furthermore, the cost of the 2001 and 2003 tax cuts, if made permanent, is 2 percent of GDP — or $11.6 trillion — over the same period, or triple the size of the Social Security shortfall.

The tax cuts and the prescription drug bill were the President’s two principal domestic priorities during his first term. Together, these policies will cost at least five times as much over the next 75 years as the Social Security shortfall. In other words, the President’s domestic policy initiatives have resulted in fiscal problems much larger than the problem that he now says he wants to address.

Indeed, if the tax cuts are made permanent, the cost of the tax cuts just for the most affluent one percent of Americans will be about the same size as the entire Social Security shortfall. Based on analysis by the Urban Institute-Brookings Tax Policy Center, the cost of the tax cuts for the top one percent of households will equal 0.6 percent of GDP — or $3.4 trillion — over the next 75 years. This is 50 percent larger than CBO’s estimate of the size of the Social Security shortfall (which, as noted, is 0.4 percent of GDP) and nearly the same size as the shortfall that the Trustees project.

As a result, instead of arguing to privatize Social Security, Democrats should be firing back at the White House through the media to fix Social Security through the Orszag-Diamond plan instead.

And to put the White House on the defensive, and in keeping with recent polls that show support for domestic spending and deficit reduction over continuation of his tax cuts, Democrats need to lay out an aggressive agenda to gradually rescind the Bush first term tax cuts during the second term . Since Mr. Bush wants us to know that his economic policies have led to a recovery, we can surely now afford to return the country to the Bill Clinton tax policies that were in place at the time of Bush’s 2001 inauguration, since those policies led to one of the longest periods of prosperity in our history.

And by gradually raising our federal revenue, the country will be able to address our current and trade account deficits, shore up the dollar, adequately fund defense and homeland security needs while not savaging domestic discretionary programs and state governments, and pursue a real national health care fix. That, plus an overall reform agenda of Congress, lobbying, campaign finance, and the FCC for starters should give the Democrats plenty to hammer the GOP with between now and next year's midterms.

Steve :: 9:38 PM :: Comments (15) :: Digg It!