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Sunday, September 5, 2004

The gimme society.

What exactly would an "ownership society" — the name President Bush gives to his domestic policy ideals — look like? And why are you haunted by the sense that a domestic agenda focused on health savings accounts, "privatized" Social Security, and tax cuts on investments will end up hurting a lot more people than they'll help?

Jonathan Chait explains in "Up and Away: Bush's Schemes to Fleece the Poor" in the New Republic (happily available to non-subscribers!). Chait identifies the fundamental problem with health savings accounts (HSAs):

Insurance is supposed to spread risk: Rather than a few people (the very sick) losing everything and most people (the healthy) getting off scot-free, everybody pays a little bit. That's what company health plans do. But HSAs would encourage the well-off and the healthy to pull out of group plans; the more that do so, the higher the rates rise for the sicker folks remaining, leading more people to drop out. That's the vicious cycle that has driven up both insurance costs and the number of uninsured. Bush's plan would accelerate it. 

He explains that "Social Security is another form of insurance—insurance against the risk of making bad investments, the risk of outliving your savings, the risk that a disability keeps you from working, or the risk of being widowed." But President Bush wants to transform Social Security radically:

Bush insists that workers "need to own and manage their own pension and retirement systems." He proposes that, instead of giving your payroll taxes to support somebody else's retirement, you should be able to keep some of it for yourself. Unfortunately, there is an arithmetic problem with that idea. Right now, payroll taxes go to fund people who are currently retired. If that money were instead diverted into the individual accounts of those still in the workforce, it would open up a huge financing hole (at least $1 trillion over a decade). And remember, Social Security is already facing a financing hole as it is. 

Beyond the shaky math, there's a deeper philosophical principle at stake. If you control your own retirement, you have a better chance of striking it rich in the stock market. But you also have a better chance of losing your money.

My question, on top of those Chait addresses, is this: What exactly is the Republican plan for dealing with people who lose their privatized Social Security funds through poor investing? (Oops! Too much Enron stock. I guess that's it for me!) Do we simply allow unfortunate investors to wallow in poverty? That's not going to work out well.

Chait also explains how Bush's tax reform proposals would make wealthy people unbelievably richer without helping the rest of us. Those of us who live by our wages would continue to be taxed, of course, and low-income Americans who don't pay income tax but who do pay Social Security taxes and regressive sales taxes would also keep right on paying large portions to the government, but the wealthy — who live more by investment income than by their paychecks — would pay less and less the more they depend on non-wage income like investments, inheritance, and interest.

Sounds like the "gimme society" to me.

Copyright © 2004 by Philocrites | Posted 5 September 2004 at 9:19 PM

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