The Privatizer's Catch-22

Krugman:

They [the privatizers] can rescue their happy vision for stock returns by claiming that the Social Security actuaries are vastly underestimating future economic growth. But in that case, we don't need to worry about Social Security's future: if the economy grows fast enough to generate a rate of return that makes privatization work, it will also yield a bonanza of payroll tax revenue that will keep the current system sound for generations to come.

Alternatively, privatizers can unhappily admit that future stock returns will be much lower than they have been claiming. But without those high returns, the arithmetic of their schemes collapses.

It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.

I'm glad to see someone finally call the administration on this point. You can't have it both ways. Of course, the administration's deceitful marketing machine will certainly try to pull the wool over our eyes with their accounting legerdemain.

Additionally, a point that is rarely addressed, and which has been conspicuously absent from any of the discussion regarding the President's proposal: what about those people who become disabled before they reach retirement? Do they have to survive on the meager savings in their private accounts, or do they get full disability benefits? What about survivors? Do they get full survivor benefits, or do they have to get by on whatever the deceased had saved to date in his/her private account?

Finally, will the private accounts be federally insured, so that people need not have to subsist on catfood in the event that their private account is gutted by another Enron?

Enquiring minds want to know!