President Bush and the Republican Party is pushing really hard to privatize the Social Security system. His effort is two-pronged. First he has to convince everyone that the current system is badly broken and must be fixed. Then he must convince everyone that the fix that is required is to replace the guaranteed benefits that are currently offered must be replaced with private accounts that will be a better deal than the current fixed benefits.
His first "prong" is to misrepresent a possible shortfall of tax revenues four decades from now as an urgent major problem that requires that the total system be radically restructured right now. At best his effort consists of a great deal of smoke and mirrors. Actually it consists of heavy misrepresentations of murky fact mixed with more than a few lies.
The second "prong" of Bush's effort is to show that private accounts are a better deal than the current situation. Bush and the rest of the Republicans brag about the success other nations have had by privatizing their social security systems. On this subject Joe Conason wrote today about the international experience of replacing a government guaranteed retirement benefit with private accounts.
Conason describes “the unappetizing results of those British, Swedish, Polish and Chilean programs.
"On closer inspection […] Sweden, Poland and Chile all differ significantly from the United States in important ways.
"In 1999, the Swedish government raised taxes to place an additional 2.5 percent of employee salaries into mandatory state-run pension accounts. That 'personal' account is designed to add to existing retirement benefits—which for most of the population include significant employer pensions as well as the traditional state benefit. Press accounts suggest that the Swedes are not enthralled with their enhanced 'choices,' with the great majority allowing the state to choose their investment funds.
"Around the same time, the Poles legislated a private pension system. Their plan immediately fell prey to crooked salesmen who charged huge commissions on phony accounts. Financial performance has been unimpressive at best, with returns lagging behind inflation or actually turning negative (like those American 401(k) statements after the 2001 crash). The only reason the Poles haven’t stormed the parliament with pitchforks is that their system guarantees a minimum, inflation-protected benefit anyway.
"The experiment in Chile has been running longer, and performed somewhat better for upper-income investors thanks to that underdeveloped nation’s enormous, rapid growth. However, most working- and middle-class Chileans would have fared better under their former system, which resembled ours, with many of the poorest now left destitute in old age. According to The New York Times, the vast majority wishes to return to the old retirement system junked three decades ago by dictator Augusto Pinochet, but it’s too late.
"That leaves the example of the mother country, whose political and economic arrangements most closely resemble our own. Almost 20 years ago, the government of Prime Minister Margaret Thatcher brought drastic change to the British retirement system, featuring private accounts. As part of this 'reform,' the Tories linked future raises in traditional retirement benefits to inflation rather than wages. The Bush administration has suggested the same change, which will have the same result: a sharp drop in benefits.
"After two decades of scandal, mismanagement and bad planning, the verdict in the United Kingdom is nearly unanimous. Their privatization has failed, the elderly are suffering, and analysts from left to right agree that our Social Security system is more efficient, more generous and more socially sustainable than theirs."
This is the program that Bush is pushing hard. He wants to privatize the retirement system under Social Security so that all Americans can have the "benefits" of private investments. But those "benefits" have UNIFORMLY been raids on the funds by crooked fund managers and a failure of the system to provide for the lower income retirees!
The primary purpose of Social Security is to provide a guaranteed minimum retirement for people who otherwise would be living on the street or supported by families who have other priorities. The experience of the British, Swedish, Polish and Chilean experiments has shown that private accounts uniformly fail to provide for those who need it most.
America does NOT need such "benefits."
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