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June 02, 2005

Gene Sperling on Social Security

He writes, at Bloomberg:

Bloomberg.com: Gene Sperling: June 1 (Bloomberg) -- Yesterday, President George W. Bush promised that his strategy for selling his now sinking Social Security private accounts proposal will eventually cut through opposition ``like water through a rock.'' Perhaps a more fitting water-related metaphor for Bush's proposal could be found at the end of the movie ``Annie Hall''.... I think what we've got on our hands is a dead shark.''....

When that moment of realization comes, the White House will certainly blame Democrats for being unwilling to negotiate on private accounts for purely partisan reasons.... Conservatives claim they simply want Democrats to come forward with their own positive ideas on Social Security. I drew a couple of pats on the back from them for proposing a three-part framework calling for no debt increases, a 3 percent surtax on any income exceeding $200,000, and a Universal 401(k) with matching credits to low- and middle-income savers.... What non-political reason, I am often asked, could there be for someone like myself who supports Universal 401(k)s outside of Social Security to so stubbornly refuse to even consider private accounts within Social Security?

The answer is twofold. First, Social Security is simply the wrong vehicle.... In our three-legged retirement system -- which includes market-sensitive private savings, home equity and pensions -- Social Security is the only leg free of market and economic risk.... The second substantive rationale for a hard ``no'' on privatization is that virtually every private-account plan is designed to make Americans undervalue the social-insurance benefits of Social Security and overvalue their private accounts.... By requiring borrowed funds for private accounts to be paid back not from the accounts themselves but by reducing Social Security benefits, [Bush's] plan is designed to make private accounts seem deceptively large and Social Security benefits appear deceptively small. This absurd design serves only one purpose: to encourage the healthy and the well-off to misconstrue Social Security as a bad deal...

Posted by DeLong at June 2, 2005 11:46 AM