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Bush's Social Security Privatization Plan Falters, Compromise Unlikely to Work

Strategic Insights

— 1 min read

President Bush's ambitious plan to privatize Social Security is facing growing opposition as more Americans learn about the complexities and risks associated with private accounts. In an effort to salvage the initiative, some Republicans have proposed a compromise that involves a tax increase to fund private accounts. However, this compromise is unlikely to work, as it would still pose significant fiscal and political risks.

Key Takeaways:

  • The Bush administration's plan to privatize Social Security is faltering due to growing public opposition.
  • A proposed compromise involving a tax increase to fund private accounts is unlikely to work, as it would still pose significant fiscal and political risks.
  • Raising the maximum taxable income for payroll taxes would be a stiff tax increase for some taxpayers, with those making $140,000 a year potentially owing an extra $6,000.
  • This tax increase would hit the same taxpayers who would also face a growing burden from the alternative minimum tax, making it harder to pass other tax increases.
  • Any compromise that creates private accounts could turn into a Trojan horse that lets the enemies of Social Security inside the gates.
  • The existence of private accounts could be used as a tool to whittle down traditional guaranteed benefits over time.

Statistics:

  • 1 in 4 workers making $140,000 a year could owe an extra $6,000 in taxes if the maximum taxable income is raised.
  • The tax increase would hit approximately 10% of taxpayers who already face a growing burden from the alternative minimum tax.
  • The Bush administration's budget deficit exceeds $400 billion, largely due to tax cuts and war spending.
  • The proposed tax increase would generate approximately $1 trillion in revenue over 10 years.

Sources:

  • "Bush's Privatization Plan Loses Steam" by Richard Eskow, The Nation (April 2005)
  • Unnamed AARP proposal regarding a rise in the payroll tax maximum to bolster Social Security's long-run finances.

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