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Upon his 2004 “victory”, Bush decided he had a mandate and it was time to push through a long time conservative wish list item, the beginning of the end of Social Security. I posted a brief history of Bush’s Social Security privatization campaign yesterday.
While never specifically set down in a formal proposal, the basic idea of Bush’s plan was to allow American workers, less than 55 years old, to set aside up to 4% of their FICA in individual accounts, up to $1000 per year). The money accumulating in the accounts, rather than going into the Social Security system as they system was originally conceived, would be invested similar to a 401K plan.
The scheme turned an essentially defined benefit plan, where benefits were based on set criteria and the investment risk was born by the company, into a defined contribution plan wherein the employee controls the amount saved and bears the investment risk. The change would have been very similar to what happened when workers lost their company pensions to 401K plans (and watched their investments get hot and then blow up in smoke).
Five years after failure of the Bush Administration sales pitch for Social Security privatization, Illinois Tenth Congressional District House Candidate, Bob Dold, among other republican candidates and incumbents, pitched about the same plan. Dold’s first incarnation was the Bush plan, only on steroids. During the primary campaign, Dold said he favored putting up to 25% of FICA into private accounts.
Dold later reduced the diverted percentage of FICA to 10-20% and claimed the big difference in this new incarnation of Social Security privatization is that the accounts would be put into “government authorized” accounts. He didn’t specify what exactly would be “authorized” about the accounts. He added a limit on investment options to make the plan seem safer, but seems unlikely that a republican Congress would tell the freedom clamoring T-parties they had to stick to T-bills.
The latest incarnation of Dold’s Social Security privatization plan reduces the diverted FICA amount to 5-7% and the accounts are government managed. Dold’s move from a large percentage of FICA diverting to a smaller amount, and his shift away from individually managed accounts to government managed accounts (knowing how unrealistic and expensive that would be), shows how this plan to privatize Social Security is crashing and burning as it did when Bush proposed it.
This post is cross posted at my Illinois Tenth Congressional District blog.