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My personal musings about anything that gets on my radar screen--heavily dominated by politics.

2005-03-19

Just to Introduce Some Skepticism

The WashPost runs a story in this morning's paper about the Galveston, TX experience with leaving the Social Security system.

County workers here were confronted with a momentous choice nearly a quarter-century ago when Social Security's financial problems prompted ominous warnings that the program was headed toward bankruptcy. The employees could either ride out the federal retirement program's problems or leave the system altogether.

After a series of emotional meetings, Galveston County's 2,000 workers voted overwhelmingly to abandon Social Security in 1981. They replaced the venerable program with a private package of life, disability and annuity benefits run by a Houston firm that promised appreciably higher payouts than they would earn from Social Security. Public employees in two other Texas Gulf Coast counties, Matagorda and Brazoria, soon followed, joining millions of other public employees across the country who did not participate in the federal plan

The Texas plan has proved to be a boon to most middle- and upper-income workers, who enjoy more flexibility and greater benefits than they would have under Social Security. But independent studies have concluded that low-income workers often do worse than they would have under Social Security.

And here is where the Post tips the hand on the Dems' next strategy with regards to SS reform: class warfare. The article is very good at citing statistics on the strength of those who benefitted from the Galveston Plaque:

Still, Gornto said, most workers come out ahead. Projections developed by his company show that, assuming a 5 percent annual investment return over 40 years , a worker earning $25,596 a year could receive retirement benefits of $1,549 a month -- far more than the $853 a month the worker would get from Social Security on retirement. A worker earning $75,000 a year over a 40-year career would be entitled to a monthly retirement benefit of $4,540 -- nearly three times the $1,645 a month that Social Security would provide, according to the company's figures.

But when putting the argument against the plan, it's all vague "experts" and no numbers to back up their argument:

But the advantages are less clear for lower-paid workers. Outside experts, including researchers for the Government Accountability Office and the Social Security Administration, have found that workers earning less than $17,100 a year in 1999 would have done better under Social Security, mainly because of annual cost-of-living adjustments. The Galveston plan offers no such increases.

I will be very curious to see how the President styles his argument on Monday. This seems like it should be a no-brainer if he can manage to overcome the inevitable demagoguery from the left.
Posted by: Michael / 3/19/2005 01:46:00 AM

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