President Bush is moving full iceberg ahead trying to convince Americans that Social Security is in much worse than shape than it's in so they'll support his pet project of privatization. But from the sounds of this Washington Post article, Bush has work to do convincing even fellow Republicans that his proposal, which would lead to cuts in benefits, is the wise choice.
"'The politics of this are brutal,' one senior GOP leadership aide said, adding that the White House has yet to convince most House members that the 'third rail' of American politics is somehow safe.
"Outside Congress, several party activists are sounding similar alarms after word spread last week that Bush is planning to reduce future benefits as part of the restructuring. Former House speaker Newt Gingrich (Ga.) is warning that Republicans could lose their 10-year House majority if the White House follows through with that proposal.
"William Kristol, editor of the conservative Weekly Standard, is challenging the president's assertions that Social Security is in crisis and that Republicans will be rewarded for fixing it. Republicans are privately 'bewildered why this is such a White House priority,' he said. 'I am a skeptic politically and a little bit substantively.'"
Kristol may be just a "little bit" skeptical of the substance of Bush's plan -- but in yet another column on the topic today, Paul Krugman skewers it. Privatization would cost more money than it saved for nearly 50 years -- and put us at risk of fiscal calamity in the process, he argues.
" ... Privatization wouldn't even begin to reduce the budget deficit until 2050. This is supposed to be the answer to an imminent crisis? While we waited 45 years for something good to happen, there would be a real risk of a crisis -- not in Social Security, but in the budget as a whole. And privatization would increase that risk."
"We already have a large budget deficit, the result of President Bush's insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements -- mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security -- looks set to sharply increase the deficit after 2010."
"Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That's a deficit that would make Carlos Menem's Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin."
To get an idea of how much the government would need to borrow to cover the costs of privatization: The Social Security actuary says an inflation-adjusted $4.7 trillion over 40 years.
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