Paul Ryan, Mitt Romney, George W. Bush, and Social Security Privatization Done Wrong

Josh Marshall:

Etch-A-Sketch Urgently Needed: Biden got Ryan to admit that he and Romney supports at least the principle of eliminating Social Security and replacing it with private accounts. In other words, the 2005 Bush plan.

The things wrong with the 2005 Bush Social Security-privatization plan were:

1. that it started with a bunch of unfunded benefit increases.
2. that it was a carve-out of existing Social Security, not an add-on.
3. that there was no backstop proposed to deal with people who gambled with their Social Security money and lost it all.
4. that the program was structured so that the government was basically lending you your Social Security benefit money at an interest rate of 3% plus inflation--and requiring that you pay it back.

At an interest rate of 1%, the money you have to pay back in 35 years is 40% larger than the principal your borrow. At an interest rate of 2%, the money you have to pay back is twice. At an interest rate of 3%, the money you have to pay back is three times as large as the principal you borrow.

The numbers of the Bush plan were such that it meant that an awful lot of people older than 70 would be destitute under such a system--but for a Randite like Paul Ryan, destitution of the unthrifty (and unlucky) old is a virtue.

I am fine with having the government invest the Social Security trust fund in equities--it can bear the risk. I am fine with private accounts as an add-on. I am not fine with financially-unsophisticated individuals being charged 3% plus inflation per year as they gamble their Social Security retirement tranche on the stock market.