Bush's Social Security Plan Would Fix Nothing

Nice analysis... I think $10.4 trillion is an exaggeration, but otherwise he hits the nail on the head.

Dec. 20 (Bloomberg) -- President George W. Bush talked at length last week about the long-term problems facing Social Security with its huge $10.4 trillion unfunded liability.

``The crisis is now,'' he said.

Then Bush described at length the glories of allowing workers to divert a portion of their payroll taxes to fund private investment accounts that would earn a better rate of return than the Social Security trust fund, accounts whose assets could be left to heirs.

``One of my strong beliefs is that all public policy, to the extent possible, ought to encourage ownership in America. I believe in owning things,'' the president said, to applause at the White House economic summit.

Not once, not once, did Bush acknowledge that the creation of private accounts actually would do nothing to make Social Security solvent in the long run. In fact, by itself, diverting a portion of payroll taxes makes the problem worse, not better.

Nor did Bush mention that, with the federal budget already deep in deficit, the government would need to borrow an additional $100 billion or more a year from the public to buy the private sector assets going into the private sector accounts.

Of course there was no need to mention that small point because the official administration line is that the added borrowing would have no impact on Treasury yields.