Bush Admits his Privatization Plan Won’t Save Social Security

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After weeks of promotion, a blitz of taxpayer-financed TV commercials, and wildly spun tales almost entirely uncritically accepted by the corporate media from the GOP machine about an imminent Social Security crisis, more people disapprove of Bush’s privatization plan than did just three weeks ago.

A recent USA TODAY/CNN/Gallup Poll found that only 35% approved of Bush’s Social Security record, 56% disapproved and 9% had no opinion. That was down from three weeks ago, when 43% approved. In March 2001, just after he took office, 49% approved.

The administration’s inability to fudge the truth enough to convince a majority of Americans to support the president’s plan to hand over Social Security funds to private investment firms as part of a "private accounts" alternative comes on the heels of several major blows to Bush’s momentum on the issue.

GAO: SS Not in Crisis

Last week, Government Accounting Office Comptroller General David Walker told a congressional committee that private accounts endorsed by Bush would not save Social Security. In fact, he said, according to Knight-Ridder, that private accounts could speed up the social insurance system’s financial problems by pulling so much money out of the system.

Walker also tried to tone down the shrill rhetoric about the system’s imminent collapse from the administration and some of the Republicans in Congress who have shrugged off public pressure enough to continue to side with the president. While the Social Security system faces some likely financial difficulties in a few decades, it "doesn’t face an immediate crisis," Walker argued.

The GOP response to Walker’s testimony, short of offering evidence to the contrary, insisted that he was "dead wrong" and pushed benefits cut as their main idea along with the president’s private accounts plan.

Straying from the planned script of weeks past, Bush admitted to a news conference yesterday that his plans for Social Security would not address the financial problems some say Social Security faces.

Failings of the British Private Account System

Bush’s announcement came just two days after the chair of the UK Pension Commission, speaking to an AARP membership event, pointed out that a partial privatization plan of the British pension system along the lines of what Bush has proposed hasn’t worked.

According to Adair Turner of the UKPC, the plan passed by the Margaret Thatcher government isn’t increasing national savings for retiring workers. Likewise, private accounts haven’t provided a larger return than the publicly operated pension system in the 18 years that they have been in place. In fact, Turner says, the system is much more complicated and risky than had been anticipated.

Another feature of the Bush plan is to index benefit increases to prices rather than wages as the current system does. In other words, benefits would increase as prices increase rather than as wages increase.

Supporters of this idea hope that it would save money, but it would be done so by increasing benefits much more slowly than with the current method.

In 1979, Turner points out, the British government also indexed benefit increases to prices instead of wages. According to at least one study, this has meant that British pensioners receive some of the lowest pensions in the world.

If their benefit increases had been indexed to wages, the value of their current pensions would average 24 percent higher, a situation that has prompted the British Trades Union Congress to demand a return to wage indexing.

If that wasn’t enough, there is more bad news for British pensioners using private accounts. Regulations did not prevent investment firms from tricking retirees into buying accounts that they didn’t need, ripping them off for thousands of pounds. Additionally, before strict regulations about fees, private account holders paid out as much as 30 percent of their accounts in fees.

Bush’s plan promises to hand over the money and the control of private accounts to private firms. And, philosophically, Bush comes from a school of thought that wants to restrain as much governmental regulatory authority as possible. Critics of private accounts see this as a basis for a repeat of the failings of the British system if Bush’s plan is enacted.

Momentum Shifts Against Bush

The recent USA Today/CNN/Gallup poll indicates the growing success of the efforts of groups who want to keep the Social Security system as a payroll tax supported, publicly operated, guaranteed benefits social insurance program.

Among the leaders of this movement has been the labor movement. The AFL-CIO launched a petition drive that has gathered hundreds of thousands of signatures against Bush’s proposals.

One of the more imaginative campaigns, however, has been the public pressure put on investment firms that have joined a coalition called the Alliance for Worker Retirement Security (AWRS), a pleasantly named arm of the National Association of Manufacturers. AWRS has spent millions on TV ads in support of Bush’s privatization plan and plans tens of millions more, according to the National Journal.

The union asked its members and allies to pressure companies with letters, e-mails, phone calls and public demonstrations demanding these companies not support privatization.

As a result of the pressure Waddell and Reed, an investment firm headquartered in Kansas withdrew from the AWRS. The union is also aiming its campaign at investment firms Wachovia Corp. in Charlotte, North Carolina and Charles Schwab in San Francisco with public demonstrations on March 31. Charles Schwab was a major donor to the Bush reelection campaign.

In addition to the Wachovia and Schwab protests, the AFL-CIO will hold at least 50 events in dozens of cities on March 31, according to AFL-CIO Director of Investment Bill Patterson.

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