Proposals

Bush Plan

Features:

Unfortunately, President Bush has been a bit short on the specifics of his plan, but what he has said is that:

1. It will incolve putting up to 4% of payroll (almost one third of the Social Security tax) into private accounts, up to $1000 when the plan is initiated and that maximum will rise by $100 plus inflation, each year thereafter.
2. Monies transferred to private accounts will reduce the guaranteed in proportion to the amount contributed, plus 3% over the rate of inflation (meaining that the private accounts will have to earn something like 3.3% over and above inflation, each year.)
3. There will be no increase in payroll taxes.

Evaluation:

As has been noted elsewhere, privatization does nothing to help address the cash flow problems expected in Social Security, but it does entail a large cost as a result of changeg from a pay-as-you-go system to one based, at least in part, on savings.

The administration has refused to offer any specifics on what it would recommend in order to actually deal with the problems or how it would finance the estimated $4 trillion needed for the conversion, although it is certainly not discouraging others from believing it would, essentially, follow the Presidential Commission's Plan 2.