17 April 2005

Social Security: Bush plan dead, Clinton plan resurrected

Typically, I devote my blog to state issues in Florida. Today, I have chosen to discuss the president's social security privatization plan. Since Florida has perhaps the greatest number of social security recipients in the nation, I think that this discussion is warranted. Unfortunately, a troubled social security program is definitely a Florida issue. So here it is ...

News broke this week that President George W. Bush has flip-flopped on his idea of private accounts within Social Security and instead may focus on "add-on" accounts outside of the New Deal program. Unfortunately, the president refuses to address the solvency problems; however, the recent declaration by one of Bush's aides shows that the administration is willing to take an important necessary step in saving Social Security which is to first do no harm. This shocking retreat by the president on private accounts may be bad news for partisan Republicans, but it is clearly good news for those who wish for a strong, solvent Social Security program for America.

Allan Hubbard, director of the National Economic Council, stated at a breakfast last Thursday that the president was willing to take a drastically different approach toward social security. Instead of diverting portions of the payroll tax into private investment accounts as he has made part of his proposal, Bush may now favor investment accounts through a new, separate entitlement program. "It really comes down to what the proposal is," stated Hubbard. Unfortunately, President Bush has spent the past few months campaigning on various policies, but has failed to actually introduce a plan like his predecessor did in the late 1990s.

The add-on accounts plan, you may remember, was the brainchild of President Bill Clinton, which was introduced following his 1999 State of the Union speech and later was endorsed by Vice President Al Gore during his 2000 campaign. The Clinton plan has now been mimicked by Republican Congressman E. Clay Shaw (R-Florida) through legislation that his office has drafted, and Senator Orrin Hatch (R-Utah) has also proposed a plan similar to that of our 42nd President. Clinton's plan, which involved his Universal Savings Accounts, commonly known as USA accounts, was more than just private accounts tacked onto social security. Clinton's overall plan involved steps to ensure the solvency of social security, which followed the Democratic Party's principle of fiscal responsiblity.

Clinton proposed on January 19, 1999 that "we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years." His plan was brilliant. It involved taking the enormous budget surplus that we enjoyed in the late 1990s and invest nearly 2/3 of the funds in the social security trust fund. Then 25% of the surplus would be invested in the private market in order to maximize our profits on this money. On top of investment income's contributions to the social security crisis, President Clinton would introduce his USA accounts as a way to empower Americans to invest their earnings in the stock market.

The choice is clear: Clinton's plan was one that empowered investors and maximized their freedom. Bush's plan on the other hand, is a big government plan, where the amounts each investor is entitled to invest and what companies they choose would be controlled by the government. Clinton's plan encouraged freedom and empowerment, while Bush's plan pushes for more government control over people's lives. We are glad that President Bush has decided to follow the Clinton model and abandon his big government plan.

2 Comments:

Blogger Mike said...

You know, despite the GOP's attempts to sully Clinton's legacy and distort his vision, like a good man you can't keep good ideas down for long.

Clinton and Gore always got short shrift from the GOP because they co-opted the fiscal discipline which was their core issue. Thanks to Bill, the GOP had to find another issue to run with, which unfortunately became "destroy the Democrats".

The points you make are very good, and it would seem that the President is finally conceding that he doesn't have the political currency he once claimed, nor the mandate to arbitrarily restructure government programs and services in his image.

Now if we could only get him to concede on border security, and killing the unnecessary tax cuts which undermine its funding...

8:58:00 AM  
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