The Times attacked President Bushs stumping for one of the benefits of his proposed common sense reforms: the fact that money in personal retirement accounts can be inherited by the families of a retiree upon his or her death. If only the ignorant masses knew what the details were, the Times editorial seems to warn.
An important feature of President Bushs plan is that, in order to draw from his or her accounts after retirement, a worker would be required to use a portion of his or her account to purchase an annuity, which is, as the Times described it, a financial contract in which you hand over a lump-sum payment and, in return, get a monthly stream of income for life.
The Presidents plan quite sensibly mandates that retirees use enough of their personal accounts to secure annuities that will provide income levels above poverty for the rest of their lives.
Ah, says the Times, therein lies the insidious catch. Because while President Bush promises that one can bequeath funds to their heirs, in truth, one will only be able to leave behind the money left over after purchasing their annuities.
This means that lower-income workers will have to spend a larger portion of their account on annuities than wealthier workers, and thus will have less to leave their heirs. Even then, retirees might choose to draw down from that remaining lump sum before death.
Lets try and put this in perspective. As Social Security stands right now, a worker can leave his or her heirs nothing she pays into the program. When he or she dies, no matter how long before retirement or how shortly after, that money is the governments.
President Bushs plan would allow workers to leave something to their heirs by letting them designate a portion of their Social Security money as their own. The Times complaint is that President Bushs something is not as much as some might initially hope, for reasons the Times admits are sound. Some workers might even burn through all of their remaining lump sum and end up leaving nothing behind, just like they do now. The obvious solution then, according to the Times, is for all workers to continue leaving nothing behind to their families by clinging to a system charted for bankruptcy.
Perhaps sensing that this argument leaves something to be desired, the Times editorial staff offers a further warning. What would happen to the money in the personal accounts of workers who died before retirement? The government could take its cut from your private account before the money went to your survivors a grab that could wipe out your stash, the Times wrote.
You would think that to have raised this fear, the Times must surely have had good reason some part of the Presidents plan must at least hint at this possibility. You would be wrong. In fact, the Times admits that The White House would hotly deny that the last alternative could happen.
Nothing freaks out the Bush administration more than the suggestion that the government would ever tap into someone's private account. A government initiative freaked out about protecting money earmarked to benefit a worker and his family? This seems like exactly the kind of foresighted panic in which we would like to find our government.
The Times final, indignant gasp was a shot about how President Bush apparently does not seem too bothered about gutting your traditional benefits.
The basic principle of personalized Social Security accounts has been so thoroughly presented in other forums that it hardly bears mentioning, but it seems the Times insisted on further clarification.
If traditional benefits are gutted i.e. government checks become smaller under the Presidents plan, it is only because an individual worker has chosen to receive other forms of capital gains to compensate for, and most likely exceed, this gap. But remember, this is itself optional. A worker can choose how much, up to half, of his Social Security taxes he wants to personally invest.
The Times brazen failure to grasp (or choice to ignore) such basic, common sense concepts might be forgivable if it were not for the condescending attitude the newspaper takes toward the ignorant masses it seeks to alarm.
The idea of making the private accounts part of one's estate is particularly appealing to low- and middle-income earners, who may not have all that much to leave to their heirs under normal circumstances, the Times noted. If those happy clappers only knew the details.
Surely such an esteemed newspaper as The New York Times is staffed with people bright enough to identify these kinds of meager arguments and put a stop to them before they are broadcast to the world.
Yet, this is just the latest in a series of flawed articles the paper has published on Social Security. By flawed, I mean articles using this same kind of dodging about the basic principles involved. We need serious discussion about Social Security reform in general and President Bushs proposals in particular; articles that obscure questions of common sense while flying under esteemed institutional banners do not help foster this discussion.
What is most worrisome about the Times and its imitators behavior is that their tactics seem to be working. Through pure pathos, they have demonized the word privatization and promoted such visceral unease about touching the historical idol of the New Deal that important reforms might not come about simply for reasons of political expediency. For a matter as important as Social Security, this is not just unfortunate; it is wrong.