Social Security Compromise Watch
by Chris Bowers, Tue Feb 22, 2005 at 12:36:11 PM EST
Second, I'd like to talk a little about the Santorum Social security event that I attended today. It was quite eventful and well attended, although I am pretty sure it was well attended because around six or seven different activist organizations had turned out in force. Outside the hall before the event, Philly DFA began chanting "Hey-hey, ho-ho, Riock Santorum has got to go!" Local college Republicans, who are just about the only Republicans in West Philly, responded with a chant that beautifully was captured live by CNN: "hey-hey, ho-ho, Social Security has got to go!" I love it when the other side does your campaigning for you!
Inside the hall, the biggest applause line of the event was generated early on when Santorum asked a rhetorical question about demographics and funding: "what happens in 2008?" Before he could answer his own question, someone shouted "Bush leaves office," and the room went wild. A little while later, less than two minutes apart, a couple of LaRouche people made some noise and comments about Pinochet, before they were forcibly removed. I think every Democratic activist in the room turned their eyes to the floor when this happened. Maybe we should fund a Republican LaRouche.
For a while, and especially during the question and answer session, the room was choked with facts and figures from both sides as many Democrats in attendance were given the microphone. I was actually able to ask the final question. Going into the event I had planned to ask Santorum about the slime attack on the AARP in the hopes it wold get some press coverage, but something he said during the presentation gave me an idea for an even better question. He claimed that some Senate Democrats agreed with Bush's proposal, so I went up and asked him to name names. He backed down and said that none of them support it now because it has become so politicized, which is a very hypocritical comment to make when you are on a campaign tour of your own.
However, after he backed down, he said that because no Democrats supported the plan, it would be necessary to find a compromise plan. Not only was it amazing to have Santorum literally say to my face that Bush's plan wasn't going to pass, but it was even more interesting for him to admit that a compromise was actively being sought. Considering this, I was particularly stunned to see this story hit the wires only a few minutes ago. It is about a "compromise" plan proposed by Paul O'Neil and openly supported by Harold Ford, Kent Conrad and, you guessed it, Rick Santorum:
The money would be invested in a conservative index of stocks and bonds and couldn't be touched until retirement. The investment would grow at a compounded rate, meaning that as the value of assets in the account grows, profit would be reinvested so the account would grow even more. Without adding a single cent beyond compounding after the child turns 18, he or she would retire at age 65 with $1,013,326 in the account, O'Neill reckons.
"If you do the arithmetic, the $1 million would provide an annuity of $82,000 a year for 20 years," O'Neill said in an interview.
O'Neill assumes a 6 percent annual return on investment. He calls that figure conservative since it represents the worst performance to date of any 25-year cycle on Wall Street.
His program would cost $8 billion in the first year: $2,000 times the roughly 4 million children born annually in the United States. Each year thereafter, another $2,000 would be deposited into each account until the child reaches age 18. Each year's crop of children ultimately would cost the government about $144 billion, he estimates.
O'Neill says his approach would eliminate the need for Social Security and Medicare - which together will cost about $815 billion this fiscal year - but not for 65 years, at which point all Americans would be millionaires upon turning 65.
"It's a way to think about creating financial security for the entire population and growing into it," O'Neill said. "It hastens the pace to convert the whole society into what I think is a hell of a lot more equitable system."
Some lawmakers in Washington are listening to him.
"I like the concept a lot, because it really takes the power of compounding and gets you a longer run at it. And for financial people, that's the real power of compounding, that you stretch it out over a more extended period," said Sen. Kent Conrad, D-N.D., the ranking Democrat on the Senate Budget Committee.(...)
Last year Rep. Harold Ford, D-Tenn., introduced a bill that amounts to a scaled-down version of O'Neill's proposal. Ford would have the government open special investment savings accounts for newborns worth $500. For children born to families with annual income below $22,000 the government would invest $1,000. Families also would be encouraged to put their own funds into the investment accounts, which he'd let them tap to pay for college or to purchase homes.
Sen. Rick Santorum, R-Pa., the third-ranking Republican in the Senate and a leading conservative, backs Ford's measure because it attacks what Santorum calls the "instant gratification culture" and promotes individual savings and an ownership stake in one's future.Is this the future of the debate? This plan would eliminate Social Security and Medicare entirely in sixty-five years, while funneling hundreds of billions of dollars annually into Wall Street. I also have to wonder exactly what "conservative index of stocks and bonds" it would be necessary to invest in order to turn a $36,000 investment into more than a million dollars in forty-seven years. O'Neil's projected 2900% rate of return seems, at best, wildly optimistic to me. Still, be on the lookout for this plan as the prospects of Bush's proposal fade even further.