Posted on 11/30/2004 7:05:45 AM PST by Phantom Lord
The Free-Lunch Bunch
The Bush team's secret plan to "reform" Social Security
During the 2000 campaign, candidate George W. Bush seemed particularly confident about his ability to pay for Social Security reform. Despite independent estimates that creating the kind of "voluntarily" private accounts he envisioned could cost more than $1 trillion, Bush consistently took the position that he could reform Social Security for free, without undermining promises to baby boomers anticipating retirement over the next several decades.
Why was Bush so sure of himself? According to documents unearthed yesterday from the trove of 19,000 files given to me by former Treasury Secretary Paul O'Neill, and a bit of additional probing, candidate Bush and later President Bush believed in the "Lindsey Plan." These documents show us what the president thought about Social Security reform at the only moment over the past three years—the fall of 2001—when he was fully engaged with this issue.
Larry Lindsey, Bush's tutor on economics during the campaign and later chairman of the White House's National Economic Council, devised a scheme based on creative accounting principles. Essentially, it proposed that the government would issue substantial new debt to sustain old-style benefits. This debt would be serviced and paid down by confiscating revenues from the higher returns from those opting for new-style personal accounts.
For the first nine months of the administration, this was called the "free-lunch" plan—a painless way to convert to a blended, private-accounts model. Inside of the Treasury Department and the Council of Economic Advisers, however, officials were befuddled by it. Lindsey seemed to have never called upon analysts inside the Social Security Administration to run the traps on his idea. Treasury and CEA did—and the numbers didn't even come close to working out. But that didn't stop Lindsey, or the president, from believing in and promoting the "free-lunch" plan. These two memos on RonSuskind.com, which have never before been released, show what Bush and others in the White House were actually thinking about Social Security reform.
A bit of context: In October 2001, Bush was about to meet with the chairmen of his Social Security Commission before it began public deliberations. In preparation, the president needed to be briefed by his advisers about various options for reforming Social Security. The Council of Economic Advisers, headed by R. Glenn Hubbard, and the National Economic Council, headed by Lindsey, prepared a 17-page PowerPoint presentation for the president. As is clear from his faxed cover sheet, Hubbard wants to talk to O'Neill about that package before it is sent to Bush. O'Neill, however, receives the proposed 17-page briefing for Bush beneath a cover memo from Kent Smetters, a senior Treasury official and a leading specialist in Social Security reform. Smetters' memo sounds the alarm about Lindsey's free-lunch plan and reminds O'Neill of the central question: Is the president, he writes, "willing to live with benefit cuts (i.e. 'pain')?"
O'Neill and Alan Greenspan favored a more robust shift to private accounts, where the old system would stay intact for most Americans—they came up with a cutoff age of 37—and younger participants would be offered only a new system: private accounts available to invest in index funds, both of bonds and equities. This proposal, which would have acknowledged "transition costs" of approximately $1 trillion, got little traction.
On Dec. 21, the commission released its report illustrating a variety of blended approaches that included some element of private accounts. In the post-9/11 environment, the report vanished with little notice. But should the president take Greenspan's recent suggestion and instigate a debate about Social Security again, we will now have some idea what he means by "reform."
If it's SOOO SECRET, how come everyone knows about it? Could it be that it's not secret at all & the "secret" moniker is just a liberal attempt at making it sound sinister?
Naw, can't be
Dictators have secret plans, the U.S. Prez can't do anything without Congress and many public hearings, calm is recommended.
Better to spend one trillion now transitioning social security to personal retirement accounts than spend $70 trillion later in order to meet the promises to future retirees over the next 75 years.
I would prefer that the "reform" be just that we take some money away from various pork projects and domestic programs to pay off anyone over the age of, say 45 and eliminate the system entirely. I would be much better off being able to invest the money I currently pay as FICA tax in my 401k plan. It should be no problem to amend tax laws to allow anyone to invest pre-tax dollars similarly, even if their employer doesn't offer a 401k.
If it is secret how come this clown knows about it?
Paul O'Neil was the biggest turd Bush appt. so far.
Repeated, capitalized for emphasis: JUST GIVE ME BACK EVERY PENNY I PAID INTO IT AND LET ME BE ON MY MERRY WAY!!!!!
Bigger than Norm Mineta?
1. Reduce benefits
2. Means test payments
3. Raise retirement age to 70 or later
Your forgot Raise Taxes.
Although these savings accounts are generally tax-free, there are ways in which they do generate tax revenue. When people take their money out early, they pay taxes. And when they take their money at retirement and spend it, taxes are generated.
Bottom line, without changing the tax laws in any way, the private accounts will result in greater federal tax revenues because when the people prosper for any reason, the federal revenues go up. That is not "confiscation," that is "common sense."
Congressman Billybob
Click for latest, "Jennings on Jeopardy! -- Nice Guys Do Finish First"
Sell off government owned land and operations TVA..
What I believe the plan to be (in over simple terms) is that if the Gov projects an avg return on the accounts to be 4%, the account overperforming this number at say 7% would have the 3% difference "confiscated".
How about giving us a tax credit equal to the total amount we have paid plus a nominal interest amount.
Let us use the tax credits for any tax offset purpose we want. Let us offset income or investment taxes. Or let us sell them to others at what the market will bring.
"If it's SOOO SECRET, how come everyone knows about it? "
It came out in the morning fax just after his secret plan to give all illegals the right to vote, and the secret plan to reinstate the draft - did you miss that one ?
Apparently, I did. I'll have to be more diligent on these subjects.
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