Things that make you go Hmmmmm...

Bush's pun aside, Social Security privatization is a major issue that the administration wants to take on in its second term. I believe that this is going to be an uphill fight for him primarily because his approach isn't the correct one. Privatizing Social Security ironically enough is socialistic in nature. The belief here is that part of the social security trust fund ought to be privatized by putting people's savings into common stocks. That way this money will yield high returns; thus the government can cut people's benefits which will then allow the government to cut back on benefits and therefore incurring savings. However, there is a major problem with this: today the government is facing a huge structural deficit and debt which will increase exponentially if such an approach is adopted. Truly a risky scheme. The government is going to have to borrow countless billions of dollars simply to keep the system afloat, whatever savings may be incurred is going to be lost by way of the additional interest we are going to have to pay the extra debt added. Therefore the government is going to have to cut benefits, thus hurting workers and the middle classes even more. Advocates for privatizing the system claim that it will increase personal choice but it will not do anything such. Essentially the government is going to subsidize Wall Street--a plan to transfer billions of dollars from workers accounts and place them in the coffers of large corporations, a huge industrial welfare program. It is going to influence the direction of market competition itself, this reform will mean that the government in essence will pick winners and losers. Supporters of this approach believe also that the market will be strong enough to reap benefits, but that is also very unclear, indeed this is completely shortsighted and irresponsible. Stock markets have no obligation to keep going up; there are winners and losers in the system. The government is going to end up subsidizing an inordinate amount of risk to keep the system afloat. This will mean that taxes will have to go up eventually if we take this path. The current system is pay-as-you-go. The more revenue is spent on subsidizing stock prices, the less money there is to pay out to current recipients and liabilities will also increase, thus taxes will inevitably need to go up. However in this age of high debt, this scheme is going to put an incredible burden on the system. Essentially the government is gambling away our retirement funds, worse yet, they are borrowing to speculate on stock prices! The government can promise to cut benefits in the future, but will the markets react will to the increased deficit? Wall Street may initially like the idea, for the government will pay out huge fees to certain brokers. However such an approach will only lead to higher inflation and the continued weakening of the US currency, as many nations will no longer see it very advantageous to continue financing our debt. Bush's approach will only make Social Security more costly. I believe that Social Security needs to reformed, but this approach will only lead to higher costs.