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Private Accounts and the Trust |
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The 2001 President’s Commission on the Privatization of Social Security, produced three plans. Plan #2 is the one the privatizers are pushing for; the other two are window dressing. Plan #2 has two steps: (1) Set up "optional" private accounts, and (2) repair the damage. This graph shows some of the damage from the private accounts.
In Plan #2, private accounts take 1/3 of the Social Security revenues and put them in private accounts. This means Social Security, which is now mainly a pay-as-you-go, but with some left over for future pensions (saved in the Trust) can no longer pay for current benefits. Instead Social Security must begin using interest from the Trust immediately.
Taking interest from the Trust would otherwise have started in 2018. This what the privatizers says causes the Social Security “crisis.” That makes no sense, and even when they start taking interest immediately, there is no crisis, but it does slow the growth of the Trust. As time goes by Social Security runs less of a surplus as it is, and with private accounts it runs a bigger deficit every year. Principle from the Trust is soon needed and the Trust runs out in 2026 instead of 2042. That’s sixteen years early.
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The “As Is” graph is made directly from data on the Social Security web site. The gap between the two curves was computed from data in the January 31, 2002 Memorandum from SSA to the President’s Commission. . The calculations and graph are available in this spread-sheet (xls, 27kB).
The damage is compensated for in step (2) of the plan. First, Social security benefits are cut relative to present law. The cut keeps getting deeper forever. This would actually make Social Security solvent without the private accounts, but with them Social Security soon needs to start barrowing huge sums of money. This will add several trillion dollars to the national debt.
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http://zfacts.com/p/794.html | 01/18/12 07:17 GMT
Modified: Wed, 26 Dec 2007 07:17:20 GMT
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