A Stitch in Haste

The Associated Press:

Democratic presidential candidate John Kerry on Wednesday called President Bush's proposal to privatize partially Social Security "a rip-off" that would create a windfall for financial and investment companies but end up cutting benefits for senior citizens.

"The truth is, the only people who benefit from George Bush's Social Security scheme are the special interests," Kerry said. ...Kerry, however, contended that diverting money from Social Security to private accounts was a "bad, old idea."

"That's not a plan, it's a rip-off," he said. "George Bush's scheme hurts seniors by cutting benefits, and it hurts our economy by increasing the deficit."

Kerry pointed to a study by Austan Goolsbee, a University of Chicago business professor, who studied a model that proposes workers set aside a small percentage of their pay in private accounts as a method to adjust Social Security to a rapidly graying population. Goolsbee concluded that fees charged by financial companies could reap them hundreds of billions of dollars and eat 20 percent of the benefits in an account held by a worker making an average salary.

The Bush-Cheney campaign said Kerry hasn't explained how he'd meet the challenges posed to Social Security by aging Baby Boomers. "His record is one of voting for higher taxes on current retirees and ignoring the needs of future retirees," said Bush campaign spokesman Steve Schmidt.

Some hasty stitches:

1. So young people are now a "special interest"?

2. So reform is a "bad, old idea" but Social Security itself isn't?

3. The Bush Administration has repeatedly stressed that no benefits for current retirees will be cut, whether there is reform or not. Kerry, meanwhile, has proposed limiting benefits to high-income retirees to a zero net rate of return.

4. Contrary to Kerry's claim, since Social Security is off-budget (the key to the whole lockbox fraud), no changes to Social Security, whether through bonafide reform or mere tinkering with taxes and benefits, would, sua sponte, have any impact on "the deficit" (i.e., the on-budget deficit) in any way.

5. So a professor has a model...and CBS had memos. Big deal. And as for financial institutions "eating" 20% of the benefits (no professor I've ever known would use such a term in a rigorous non-partisan academic study) -- well, that would at least imply that there would in fact be benefits to be eaten away at. (The 20% figure is, of course, utter nonsense -- how much bloodsucking do you see in, say, the IRA market today?).

Much more at Cato. Also, Deinonychus antirrhopus (aka the market manipulator of my BlogShares) has similar lamentations (actually he has back-to-back posts).

Meanwhile, here are some of my other major Social Security posts:

The Other Pension Crisis
The Social Security Meta-Crisis
Social Security: AvP GvK
Getting Kerry-ed Away on Social Security
Social Security: Read It and Weep
Social Security: What's in the "Lockbox"?