Truth - Al Franken [77]
When Bush says the Trust Fund will go flat broke in 2042, he’s using the intermediate projection. But guess what the optimistic projection says? It says we’ll have much more money in the Trust Fund then than we have today. In other words, it’s very possible that we have nothing to solve.
But let’s say you want to play it safe and use the intermediate projection. You still have plenty of options for ways to achieve solvency. The most popular one is to raise the cap on income subject to the payroll tax, known as FICA, after the Federal Insurance Contributions Act. Right now, the cap is at $90,000, meaning that if you make $180,000, you pay FICA on only half your income. Everyone earning under $90,000 pays payroll taxes on every dollar they make, which is why a majority of Americans pay more than half their federal taxes in payroll taxes.
Polls consistently find that more than two thirds of Americans favor getting rid of the cap entirely. Another strategy is to raise the cap to $120,000, or $150,000. I’ve been proposing something called “The Al Franken Donut Hole,” which is too complicated to describe anywhere but in a footnote.1 Representative David Obey of Wisconsin has proposed reinstating the estate tax and using that to help pay for any shortfall. You could also gradually raise the retirement age. Or the Social Security Administration could invest part of the Trust Fund in stocks, rather than treasury bonds, which would introduce a little bit of risk, but that risk would be shared by everyone, and the administrative costs would be almost nothing.
There aren’t many moving parts in Social Security. It’s not like Medicare, which is a nightmare.2 Two reasonable senators of good faith, one Republican and one Democrat, could sit down and solve the solvency problem in five minutes.
If we have nothing to solve but solvency itself, we have nothing to fear.
But in every speech where Bush talks about solvency, he talks about private accounts. Here’s a clue that Bush isn’t on the level. The private accounts would do nothing to solve the solvency issue. Nothing. Nada. Not a cent. No help. At all.
And the Bush administration has, albeit reluctantly, admitted it. In a February 2 background briefing, an anonymous Bush administration official addressed the issue directly. “In a long-term sense,” he said, “the personal accounts would have a net neutral effect on the fiscal situation of Social Security and on the federal government.”
When a reporter asked the anonymous official whether that meant “it would be fair to describe the personal accounts by themselves as having no effect whatsoever on the solvency issue,” he—or she—responded that “that’s a fair inference.”
In fact, while private accounts were “net neutral” in the long term (sixty-plus years), they were “net horrible” in the short term as far as solvency was concerned. Every dollar paid into a private account would be a dollar not paid into the Social Security Trust Fund. Over the first twenty years, the federal treasury would have to borrow an extra $5.3 trillion to cover the costs of private accounts.
Of course, that $5.3 trillion would be subject to what Albert Einstein called “the most powerful force in the universe”: compound interest. Bush’s plan was for your children, your children’s children, and probably their children and their children’s children to pay down all of that interest.
For this and other reasons, Democrats in Congress announced that they would be happy to negotiate a plan for Social Security, as long as private accounts were taken off the table. But Bush dismissed the offer out of hand. And then kept on denouncing Democrats for being the party of obstruction.
Maybe Bush’s motivation for private accounts was rooted in something more profound. Of all the reasons he gave for taking