Friday, February 11, 2005

Social Security flimflam

Well, the President has officially done it. He has said that the Social Security trust fund doesn't exist. He said that it is pay-as-you-go, which it is to some degree, but more importantly, as Josh Marshall has said (rather correctly, by my account), Bush basically announced that the government is going to default on its bonds.

This comes on top of a budget that Paul Krugman writes, "One of the proposed spending cuts would make it harder for working families with children to receive food stamps, terminating aid for about 300,000 people. Another would deny child care assistance to about 300,000 children, again in low-income working families." Yeah, nice job of showing the compassion in your CONSERVATISM.

But back to the Social Security issues. The government defaulting on the Trust Fund means that the economy would collapse. Quite simply, there are no limited defaults, or defaults to ONE customer. And in any case, any default, even if, say, a Republican government did try to claim that it was only a default on domestic T-Bills, would cause a worldwide run on the dollar, causing unemployment as far as one can see and the dollar turning into the Mexican peso of a decade ago, or Russia's old Comecon rubles, worthless paper. Only those with precious metals would have any real wealth.

David Brooks, a conservative whom I respect and agree with a good portion of the time, wrote this a few days ago. The money quote: "We'd have to take care of today's 20-somethings, who are already too old to benefit from the new [KidSave] accounts, but this proposal would lead to less red ink than the president's current plan. And let me commit an act of heresy: it would be smart for Republicans to forgo making the Bush tax cuts permanent in exchange for these kinds of accounts. The Bush cuts are going to be repealed by the next Democratic president anyway, but these accounts, once created, would be forever."

Brooks says that either A: people could divert a portion of the payroll taxes into these accounts, or B: invest their own money to supplement the [likely] reduced Social Security benefits. Not only is Brooks saying we don't have to tear down Social Security, he is being realistic, and wants to revoke the tax cuts, a great budget hawk idea that I like a lot. The article is definitely worth reading and an option both parties should consider. Personally, I think B is a better option, but this truly doesn't hurt the system. If people invest their own money to supplement the existing safety net, it will encourage a savings atmosphere, kind of like UPromise, the college savings fund. In short, this beats the hell out of the reckless, coldhearted budgets of our President.


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