Bush Favors Forced Savings with National Controls

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Bush Favors Forced Savings with National Controls

by Ari Armstrong, February 3, 2005

In his February 2 State of the Union address, President Bush provided a few of the details for his plan to reform Social Security. Bush called the huge, regressive welfare tax that violates economic liberty, hurts the working poor and middle class, and stifles economic progress "a great moral success." Yet the forcible redistribution of 12.4% of the income American workers is anything but moral -- it is instead a moral outrage.

Bush proposed a forced savings program severely controlled by the national government. Here is the central passage:

"The goal here is greater security in retirement, so we will set careful guidelines for personal accounts. We will make sure the money can only go into a conservative mix of bonds and stock funds. We will make sure that your earnings are not eaten up by hidden Wall Street fees. We will make sure there are good options to protect your investments from sudden market swings on the eve of your retirement. We will make sure a personal account can't be emptied out all at once, but rather paid out over time, as an addition to traditional Social Security benefits. And we will make sure this plan is fiscally responsible, by starting personal retirement accounts gradually, and raising the yearly limits on contributions over time, eventually permitting all workers to set aside four percentage points of their payroll taxes in their accounts."

The first thing to note about this part of Bush's plan is that it does absolutely nothing to solve the financial problems with Social Security that Bush described elsewhere in his speech. Workers could instead simply be allowed to keep those "four percentage points of their payroll taxes," to spend or invest as they see fit.

But rather than endorse economic liberty and leave people free to use that money how they want, Bush proposed a new national, strictly controlled program of forced savings.

Since when is it the national government's job to "set careful guidelines" for investments? Free markets require precisely that the national government keep its hands off of investment markets.

Why should the national government force us to invest "into a conservative mix of bonds and stock funds?" I believe buying government bonds is immoral, because doing so encourages deficit spending. Yet the Social Security tax is also immoral, so Bush plans to force me to use my money in a way I find morally reprehensible. Others have a moral problem (whether justified or not) funding various companies, something they may be forced to do under Bush's plan.

By the term "permitting," Bush really means "forcing." Workers have at most two basic choices: either they can pay that money into the Ponzi scheme known as Social Security, or they can put the money in the forced savings program. Under no circumstances will workers be allowed to actually use that money the way they want, in Bush's scheme.

Bush wants to "make sure a personal account can't be emptied out all at once." In other words, he wants to make absolutely certain that people cannot spend their own money the way they want. Instead, that money can only be spent in the amount and at the time dictated by national politicians.

At least Bush talked about a few reforms that would actually reduce the severe burden of Social Security. He said, "Some have suggested limiting benefits for wealthy retirees. Former Congressman Tim Penny has raised the possibility of indexing benefits to prices rather than wages. During the 1990s, my predecessor, President Clinton, spoke of increasing the retirement age. Former Senator John Breaux suggested discouraging early collection of Social Security benefits. The late Senator Daniel Patrick Moynihan recommended changing the way benefits are calculated. All these ideas are on the table."

It's good that these reforms are "on the table," but they should constitute the core of Bush's plan. Indeed, these reforms, if taken seriously enough, could be implemented in a way that would eventually phase out Social Security.

So, despite my severe disgust with Bush's program of forced, controlled savings, I do recognize his courage in bringing up the issue of cutting benefits.

Ironically, the sentence immediately following his discussion of Social Security in Bush's speech was, "Our second great responsibility to our children and grandchildren is to honor and to pass along the values that sustain a free society." Unfortunately, Bush's proposal of a forced national savings program controlled by national politicians is the exact opposite of what's needed for a free society.

For additional analysis, please see Social Security: Collected links.

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