In Defense of Bush’s Soc. Sec. Proposal

It’s time for “fair and balanced” so we’ll let Donald Luskin tell us why Bush’s proposal makes sense by noting two of his posts today. In one, he noted a couple of privatization principles:

Replace The Empty Promises Being Made to Younger Workers With Real Money. Younger workers should have the option of putting a portion of their payroll taxes into a voluntary personal account which will allow them to build a nest egg that belongs to them. This money will give workers an opportunity to receive a higher rate of return than the current Social Security System can provide.

Voluntary Personal Accounts Should Include The Risk Free Option Of Investing In Treasury Bonds. Voluntary personal accounts should include an investment option that allows workers to invest in U.S. Treasury bonds, which have no risk. Workers who have reservations about investing in the markets will still be able to rely on a Social Security check that is equal to or higher than today’s retirees.

In another, he links to the White House webcite that states:

Today, some opponents of fixing Social Security are suggesting that the President’s proposals would result in “benefit cuts.” This rhetoric recklessly disregards the facts about the President’s proposal:

Fact: Under the President’s proposal, benefits would grow relative to today’s levels. Future generations of seniors would receive benefits that are at least as high as seniors receive today (even after adjusting for inflation.)

Fact: The Pozen proposal referenced by the President would allow for faster overall long-term benefit growth than can be paid by current-law Social Security.

Fact: Under the Pozen proposal referenced by the President, lowest-income Americans would get the fastest benefit growth of all, significantly faster than inflation.

Fact: Under the Pozen proposal referenced by the President, medium-wage workers would also receive faster benefit growth than the current system can pay.

Fact: The current Social Security system can fund only 74% of promised benefits in 2041. The Social Security actuary’s analysis of the Pozen proposal finds that at the same time, each of “Low Earners,” “Medium Earners,” and ‘High Earners” would all receive benefits that are higher than the current system can pay.

Fact: All of the above figures exclude income from personal accounts. Social Security Administration figures show that expected benefit growth will be even greater for those who choose to participate in voluntary personal accounts.

I report, you decide!

Update: The rebuttal is already in – ably provided by Jason Furman (with hat tip to Brad DeLong). For those of you who thought I’d have to comment – outsourcing to CBPP is the way to go!