Posted on: Monday, December 20, 2004
EDITORIAL
Economic summit more like cheerleading
By most accounts, the White House economic summit last week was a pseudo-event.
A $422 billion federal budget deficit is a problem worthy of serious debate. But the solutions promoted at the gathering of handpicked business executives and economists, none of whom opposed them, were not even subject to discussion. A few talking points:
The centerpiece of Bush's agenda to halve the deficit in five years, as he pledged during his re-election campaign, includes putting Social Security on the road to privatization, and making permanent $1.8 trillion in tax cuts over 10 years.
He can't be serious.
It's the plunge in federal tax revenues because of tax cuts to the wealthy and other perks that put us in this bind in the first place. Further, it appears that the cost of privatization of Social Security will add to it.
As part of his plan, Bush wants to allow workers to divert some of their Social Security payroll taxes into private investment accounts. We doubt that this is intended as a boondoggle for financial corporations, although they relish the idea. Instead, it seems an ideological abhorrence of the ever-popular, 70-year-old New Deal retirement plan.
Granted, there's a problem with Social Security. In 10 to 20 years, demographers and economists predict, the swell of baby-boomer retirees will lead to more money going out of Social Security than going in.
Proponents of privatization point to plans in Britain and Chile, but a closer look shows high expense ratios keeping average investors from realizing much growth. In Britain, alarm over fees charged by investment companies led to government regulators imposing a "charge cap."
Then there's been the unexpected expense of supporting the portion of pensioners whose investment portfolio has gone belly up, which has meant that neither Britain nor Chile has saved money over earlier plans.
Of course the money in the Social Security trust fund is invested in government bonds, and thus helps to finance the deficit. If Social Security tax revenues are diverted to private retirement accounts, the government would have to make up the difference by borrowing more billions.
Of course, all these points are debatable. And that's what we'd like to see at the next economic summit: a serious debate.