According to this story in the Wall Stree Journal, the Democrats do have a plan for Social Security reform, and the reality of that plan may actually be worse than doing nothing. The window for the Republican controlled Congress to push through a sensible plan is rapidly closing. Now is the time for action, or we may be dealing with the consequences for lifetimes.
That’s an opening Republicans might try driving a reform plan through. But in granting this opening, Mr. Hoyer has revealed a broader political strategy. Without control of Congress or the White House, the left has been looking for a new power source, and they may have found one in large pension funds. The AFL-CIO and other labor unions are testing the waters by publicly protesting against Charles Schwab, Edward Jones and other investment houses in hopes of scaring them away from the Social Security debate. The Labor Department is now looking into accusations that Big Labor is threatening to pull pension funds from investment houses that refuse to play along. Making such a threat may violate a union’s fiduciary responsibility.
Regardless of what the Labor Department finds, this is where Republicans might want to start considering what will happen if they do not pass Social Security reform this year. One popular theory in Washington is that President Bush has firmly implanted the idea of reform in the national consciousness, but that it now must take root there over the next four years or so–into the next president’s term–before it can be enacted into law. There’s even a sound bite: President Hillary Clinton will sign Social Security reform into law, just as Bill Clinton signed welfare reform.
The symmetry is appealing, but misleading. The danger in losing the Social Security fight this year isn’t that President Bush’s reform agenda will die along with it, but rather that it will live on. President Clinton had to be brought to welfare reform kicking and screaming. But President Hillary or another Democrat will likely be more shrewd and embrace reform. Doing so would allow Democrats to infuse those reforms with Mr. Hoyer’s ideas of using the government to invest funds in the stock market. We’ll likely get a mix of higher taxes, reduced benefits for some, and “diversified risk” with publicly invested money. It will sound like a middle-of-the-road compromise. But if it comes to pass, it will give the secretary of labor and the other trustees a new tool to influence financial markets for political reasons.
Republicans didn’t have to let this genie out of the bottle. But they were sent to Washington to make fundamental changes to the welfare state, and now they have a limited time to get their ownership society wish. If they miss this opportunity, it may turn out that all Republicans will have succeeded at doing is setting the stage for a massive expansion of the federal government.
Be afraid. Be very afraid.
Hat tip: PowerLine
Cross posted at The Wide Awakes
You failed to explain what we should be afraid of happening. Right now the Republicans or at least one from SC is floating a plan that will do the things mentioned in this article 1. raise the ceiling on the amount of income that can be taxed for social security 2. slightly raise the age at which a person becomes eligible to receive benefits 3. reduce benefit amounts and 4. the add on accounts starting at 4% as the president has proposed. The government does not wnat to invest social security in the stock market because it is too risky. That should tell you something. Even President Bush has given tacit acknowlegment of this by limiting the investment opportunites that social security, who would manage the funds, can make on your behalf in order to mimimize the risk. If you would like to know what the Dems are really thinking about, in response to the Republicans claim that social security is nothing more than welfare, the Dems are thinkin gof restructuring social security from its current state of “welfare” into the social insurance program that it was originaly envisioned as being. Insurance not welfare. What does this mean exactly? Well right now you buy insurance to hedge your bets against dying. You can buy insurance to hedge your bets against having to go into a nursing home -long term health insurance, oh yes and you can buy health insurance to hedge your bets in case you get sick. Social security woudl become insurance to hedge your bets against the inability to save enough money to see you through your old age when you can no longer work. I am talking about means testing. People like me would nto get much of anything upon retirement but if my retirement funds ran out before I ran out of life then I would qualify to receive some benefits. Right now regardless of how much money you make or have you can draw social security. This plan addresses the solvency of the program without totally dismantling it. The private accounts the president proposes do nto address the solvency problem and they would add a tremendous amount of debt to the national debt, which according to Alan Greenspan would suppress the market almost ensuring those investing in the private accounts would end up worse off. Private accounts aren’t going to catch on with the savy as a safety net until this country addresses corporate malfesance and overpaid CEOs who receive huge paycheck without regard to company performance and get huge golden parachutes if removed because of doing poorly. Add on accounts were first suggested by Dems nearly a decade ago to spur folks to invest. It would have also created a portable retirement system geared to todays job market in which peopel switch jobs frequently unlike 40 years agao where you retired at he company where youfirst started work.
I have a class this term and the topic of social security has been one of the topics debated. Honestly all the hype about the social security problem is what is creating the problem. Yes there is a slight oversight in the system due to the baby-boomer population and the effect their exit out of the workforce is going to cause. But there is no need for drastic measures to be taken to fix the shortage of funds. Drastic measures such as privatization is what could cause the entire system to crumble. In fact a simple change such as increasing the age at which a person receives benefits or reducing the amount of benefits the richest 10% would receive could easily fix the problem. I really believe this is a time for moderation. There is no need to drastically alter the social security system but something does need to be done. Now is time for planning and intricate dissemination of the program before acting. And please beware of increasing the hype. 💡
Interesting perspective, Avery. As a early 20 something, you stand to lose or gain the most from the outcome of this debate. I would have thought you would prefer to keep and invest your hard earned dollars rather than have the gov’t suck it up into a bottomless pit where you are unlikely to recoup even a fraction of what you pay in.
At least that’s how I see the issue. Do most of your peers and classmates feel as you do? If so, that is going to make this issue a political landmine.
Thanks for coming by sweetheart. It’s always great to hear from you. Hope you are well.
It is likely that most of Avery’s peer group feels that way – because they are in college and this is what they are being taught. When you are in college it is easy to be cavalier with other people’s money (I remember). I have found that the “real world” is a good cure in most cases.
Actually Ashley I expect Avery’s outlook on this subject to be less influenced by personal factors than your own. To put it bluntly she doesn’t have a dog in this fight yet. I think by putting the issue in the very narrow perspective of the money you are being taxed for the current system versus the possibility that there will be nothing there for you to rap in return has caused you to ignore adjacent issues. If the system is undermined, Americans will still pay but in other forms of welfare. If we increase our national debt to finance personal accounts, that debt will hurt the market. Our country borrows from foreign investors to cover our debt. Already Korea and Japan have signaled that dollars aren’t looking like such a good investment. America isn’t lookin glike a good investment. If we take the money currntly collected under social security and pour it into the stock market, the money that the government has been using from social security to pay for government services (other than social security) will have to raised in another way or else government spending curbed. The shortfall cannot be addressed simply by curbing domestic nonmilitary spending. It will requrie the wholesale elimiantion of some government programs probably beginning with the dept. of Education. Ok, that was probably not the best example. Bottom line for every elimination at the federal level you will see an increase in taxes at the state level. Try looking at the big picture.
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