MoveOn.org is back with its second misleading attack on President Bush's proposal to create private accounts in Social Security (for part 1, see this post).
The best part is that the group's criticism of Bush's plan ends up promoting the same confusion as the White House by suggesting that private accounts and calculating benefits using "price indexing" are necessarily related. The truth is that they are two separate issues. Yet MoveOn makes the following highly suspect claim in an email to supporters:
Social Security privatization requires diverting taxes used to pay current benefits into private accounts. Without that money, Social Security benefits will inevitably be cut -- up to 46 percent for future retirees. Even under rosy projections the private accounts don't make up the difference. The deepest benefit cuts are for young people. Somebody in their twenties today would see benefit cuts as high as 30 percent. Should we really have to pay for Bush's risky private accounts with our guaranteed benefits?
The claim that private accounts "inevitably" lead to benefit cuts of up to 46 percent is ridiculous. The 46 percent figure refers to someone receiving benefits in 2075 if those benefits have been calculated according to what is called "price indexing". We could switch to price indexing whether or not private accounts are created, and private accounts would not necessarily require such deep benefit cuts if other sources of revenue were found.
MoveOn also buys into Bush's spin when it writes that, "[e]ven under rosy projections, the private accounts don't make up the difference." Private accounts don't "make up the difference" at all; despite occasional suggestions to the contrary, even the White House has admitted that they do nothing to improve the financial state of the Social Security system.
Here's yet more nonsense:
Social Security is not going bankrupt, contrary to the president's claims. That is a deception perpetrated in order to create the urgency for radical changes. Under conservative forecasts, the long-term challenges in Social Security do not manifest themselves until 2042. Even then Social Security has 70 percent of needed funds.
In fact, the "long-term challenges in Social Security" manifest themselves long before 2042. Bush's claims of an impending crisis, bankruptcy, etc. are exaggerated, but the system will be running large deficits that will strain the federal budget for years before the trust fund is completely exhausted.
Finally, MoveOn makes tendentious claims about Bush's motives:
So who does benefit? George Bush's base. Giant financial services firms have been salivating for decades over the prospect of taking over Social Security. They'd make billions in new fees -- essentially a new tax -- off of our Social Security payments.
As I pointed out before, if Bush wanted to maximize the fees received by Wall Street firms, he would hardly be pushing to model the system on the federal Thrift Savings Plan, which offers only five low-expense index funds. Talk about partisan hackery.
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