Wednesday, February 02, 2005

Some thoughts on Social Security

Watching CNN right now, hearing the back-and-forth about the issues expected to be in tonight's State of the Union, it's quite interesting. They interviewed some former Enron employees, one of whom lost $340,000 from her Enron 401(k). Is this what could happen in privatization? Probably not, since no one really puts in that much from Social Security deductions.
However, the point of Social Security, as I mentioned in the previous post, is that it is meant to be security, and no private investment, save for U.S. Treasury bonds (which, by the way, is what Social Security's trust fund is compiled of). Treasury bonds are good unless the government were to default, in which case the entire economy would collapse. By using Social Security to make up deficit holes for years, the government (especially in the past four years) has helped create the situation that President Bush can now convieniently call a "crisis."
The government could never default on its bonds, so the worst thing that could happen is having to come up with year-by-year funding for benefits in the budget, cutting benefits, or deficit spending. None of these are good. Social Security is the touchiest button, and the only reason the President is trying to push it right now is because the Republican majority is likely to end this decade.
2006 could possibly be a turning point in Congress. The Senate has the best chance of changing hands, which would give the Democrats some veto power again over Bush policies. If the president were to blow his handling of the Social Security issue, or tried to ramrod through a partisan "reform", the whole Congress could shift hands. Therefore, he really has this year only to try and pass his plans, so if he doesn't compromise, it will stay dead in the water. Expect bloodshed. A lot of it.


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