Talk Radio News Service: News, Politics, Media

By Ellen Ratner
We've all heard of the so-called "tax-and-spend Democrats." I heard a great variation on that theme last week: "charge-and-spend Republicans." Just when I thought that the Bush administration was going to at least consider doing something about the national debt, they came up with a $2 trillion corporate giveaway camouflaged as "saving Social Security."

After spending a day with the White House "Social Security 101" class last week, it became obvious that no matter how you spin it, the taxpayers are still going to have to shoulder the "transitional debt" for the new "personal savings accounts." Transitional debt is the administration's euphemism for "kiting" a giant check (as in the difference between the amount that I write the check for and the actual amount of money I have in my checking account is "transitional debt").

Who cares you say? So we have more debt, what's the big deal? The person who gave me the phrase "charge-and-spend Republicans" pointed out that the current national debt represents 70 percent of our gross domestic product (before privatizing Social Security). He said: "This is like having an annual salary of $100,000, but having $70,000 worth of credit-card debt." If this does not represent a red flag for you, I'd hate to see your family balance sheet.

Our nation's debt is an economic train wreck waiting to happen. Even the Bush administration cannot defy the laws of supply and demand. The growing federal deficit will ultimately drive interest rates higher. Yet, it was the low interest rates that powered the economy out of recession in the last few years. Privately, the president's economic advisers admit that low mortgage rates are what enabled people to refinance to their hearts content and pump the windfall back into the economy.

Aside from creating massive debt and driving up interest rates, there are many other problems with privatizing Social Security. Since most of us act out of our own self-interest, I will focus on a little known fact that affects the bottom line of every personal savings account holder. The individual's personal account profits will be capped at a federally determined level. It's possible that this growth cap could be as low as 2 percent. No matter what the cap is, the government will keep the rest of the profit.

The government would have an enormous additional incentive to manipulate the stock market. Meanwhile, the individual account holder must assume all of the risk of a stock market decline without getting all of the upside of a market boom. This is a risk that should not be taken lightly given the enormous growth in emerging markets in China and India, coupled with the incredible shrinking U.S. manufacturing base. If you still like the president's plan, I have a nice piece of waterfront property to sell you on the Tigris River.

Yes, Social Security is headed for trouble. There are fewer workers paying benefits to the larger retirement class. But there are ways to address the shortfall that do not include a giant kiting scheme that will at best drive this bankrupt nation further into debt, and at worst set off a chain of events that will throw us back to the days of double-digit interest rates.

Of course, these solutions include radical ideas like raising the $90,000 limit on the Social Security tax; or "means testing" Social Security benefits so that those making more than a $100,000 a year in retirement would get a reduced benefit. These remedies involve tapping into the president's "base," however.

As we learned in his last term, he would rather drive the nation further into debt with tax cuts in the middle of a war, than ask his friends and family to pony up a little for the little guy.