In the third presidential debate, George W. Bush stumbled on the same question that tripped up 8th District congressional candidate Dave Reichert in his debate against Dave Ross. The question is asked to any proponent of “privatizing” Social Security: If you allow workers to keep their Social Security taxes for private accounts, how do you pay people on Social Security now?
Neither Republican answered the question.
Reichert didn’t seem to understand it.
Bush counterattacked, saying that Kerry had not considered “the cost of doing nothing.” That was true; Kerry hadn’t. But Bush had not answered the question.
There is an answer. Part of it is that you can’t let younger workers put all, or maybe even half, of their tax contribution in a personal account. The Republicans don’t want to say that. Part of the answer is that you have to deplete the “trust fund” more quickly than otherwise, and then start going into debt for hundreds of billions of dollars. They don’t want to say that, either, but it is dishonest not to say so.
There is still a good case for doing it, because in the long run a switch to private accounts extinguishes the government’s liabilities. That is, there are huge ($7 trillion) liabilities in the current system that aren’t accounted for. Privatization makes much of it go away.
Furthermore, once you get to a system in which each generation pays for itself rather than for its parents, workers can make use of compound interest. They can’t, now. You pay a tax, and 30 years later you get it back at almost no interest. But putting all the transition cost on one generation is making them pay for retirement twice. It has to be spread out.
Also part of the answer is that no one's plan should be compared with the present system. Democrats do this all the time. That, too, is dishonest, because the present system is not sustainable. It has to be changed. Either taxes have to go up, benefits down or the system has to be redesigned to allow for some new source of revenue.
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