Bush to Revive Social Security Tax Plan

We are one closed committee meeting from getting this shoved down our throats ...

Bush to Revive Social Security Tax Plan
Jan 16, 8:27 AM (ET)
By SCOTT LINDLAW

WASHINGTON (AP) - President Bush will use next week's State of the Union address to try to revive a proposal that would allow younger workers to invest a portion of their Social Security taxes in the stock market, aides say.

His election-year agenda also calls for pressing Congress to make already-enacted tax cuts permanent, such as the elimination of inheritances taxes and reductions in capital gains taxes. Bush is considering whether to renew his push for a new kind of tax-preferred savings accounts that could be used for retirement, college, health care or other purposes.

Bush will address the nation in a televised speech before a joint session of Congress at 9 p.m. EST Tuesday, three years to the day after his inauguration and one day after the Iowa presidential caucuses.

Approaching a battle for re-election, Bush is expected to highlight economic growth and successes in the fight against terrorism, most notably the capture of deposed Iraqi President Saddam Hussein.

It will be a stay-the-course message at a time when his Democratic rivals are urging a change at the White House.

"He needs to make the case as best he can that people are better off and more secure than they were four years ago, and that maintaining the status quo is the better course for the nation," said Phil Trounstine, the director of the Survey and Policy Research Institute at San Jose State University.

"He has to be political but deft. It can't sound like a political speech," said Trounstine, a former communications director for ex-Gov. Gray Davis of California. "He's got to sound like he is a statesman and the leader of the nation, not a politician and the leader of his party."

The partisan atmosphere of the campaign year may diminish the chances of major action on Bush's initiatives, some of which have languished for years. But the administration hopes that last year's approval of sweeping changes in Medicare and the addition of a prescription drug benefit will clear the way for action on Bush's proposal to partially privatize Social Security.

As a candidate, Bush said he would shore up future funding for Social Security by giving workers the option of staying in the current retirement system or investing a portion of their Social Security taxes in individual retirement accounts.

Workers who chose to invest would receive a smaller Social Security benefit when they retire, which would be supplemented by earnings from their investment accounts.

Bush also is considering whether to renew his push for lifetime savings accounts that could be used for any purpose, with tax-free withdrawals, and for retirement savings accounts in which money could not be withdrawn tax-free until the accountholder reached a set age.

As originally proposed last year, contributions to the accounts would not be tax-deductible. Yearly contributions would likely be capped at $7,500.

Bush has already announced two large-scale proposals this month, rather than saving them for the State of the Union address.

On Jan. 7, he asked Congress to grant legal status to millions of undocumented workers in the United States. A week later, he said he wants to establish a long-term presence on the moon to serve as a springboard for ventures deeper into the solar system.

Rolling out those big initiatives ahead of the State of the Union garnered Bush several days of public attention, rather than one or two if he had saved them for Tuesday, Trounstine said.

In the State of the Union speech, Bush is likely to forcefully defend the immigration initiative against criticism from conservatives and from liberals alike, one administration official said.

Other officials said they expected Bush to renew his call on Congress to make his tax cuts permanent.

Some of the reductions Bush enacted, such as the estate tax, phase out during this decade but come back in 2011.

One conservative activist who talks to White House officials often said Bush is under pressure to call for a constitutional amendment banning same-sex marriage.

But Bush is unlikely to wade into such a polarizing issue at the starting gate of an election year, the conservative activist said.

Ken Khachigian, who wrote speeches for Presidents Reagan and Nixon, said Bush needs to defend his policies while "laying out a few new things to spice up the policy agenda so that he's not just sitting back."

"Without stooping to the same shouting you're getting on the Democratic side, give a very presidential response to the criticisms," Khachigian said he would advise Bush.

 

I eagerly await the board's fiscal conservative to chime in with their shock and awe.

 

We can keep this thread to topic to the wisdom of GWB SS plan. TJ's topic appears to more directed toward GWB Lifetime Saving Accounts.

 

I'd like more information on the solution proposed.

Our president GWB has also been short on the details. Perhaps a closed Congressional committee can create the new SS bill and express it to the president's desk without much review. We can only hope.

 

Outside of having the actual specifics, we can make an educated guess about GWB's proposal.

The current SS is a pay as you go scheme. Any surplus is used to balance the budget. There are some accounting hocus pocus where the government lends the surplus back to itself. This would make the SS trust fund look like something it is not, a stand alone trust fund. The truth is that the SS funds go into the federal government's general fund and the SS outlays come from this fund.

The fear that some have expressed that SS will go broke is fantasy. Any annual SS deficit would be made up from the feneral government general fund. The federal government would first have to go broke, before SS checks would stop being sent.


GWB is proposing that younger SS participants get a small portion of what they pay set aside in an account with their name on it. The particapnts would be able to make investment decisions on those accounts.

What needs to be addressed is how the shortfall in the general fund will be made up. Either other taxes will have to raised or spending will have to be cut. GWB is a fan of neither.

Another problem with this change is the very nature of SS will be changed. As is, SS is a safety net. Investors who make poor choices may find that they end up with less money in their retirement than they would have without GWB's change. These people may end up needing additional government assistance to get by.

For SS to remain a safety net, individual investors should not be allowed to managed their accounts. Professional money managers would be needed.

 

So you never heard about 401Ks or 403Bs or IRAs?

And what is there to stop you from shorting the market (or any other high risk investment strategy)?

 

It is a tax. I don't know what else you would call involuntary payroll deduction that are sent directly to the federal government (like the payroll tax). If it walks like a duck, and quacks like a duck, ...

It is not a savings plan. The SS trust fund exists only as an accountant trick, to cover the fact that SS/FICA is a pay as you go system.

It is woefully inept. Agreed.

Now if we were to start over, I would prefer to have individual accounts in a savings plan. We then could discuss whether or not individuals would be able to make investment decisions on the money in their accounts (versus having their monies professionally managed).

BTW, I do not think there will be that many more years where SS will run a "surplus" and there will even be a possibility to direct the surplus into individual accounts.