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Now That You Mention It, Perhaps These Private Accounts Aren't Such a Good Idea After All

On Sunday, I mentioned that support for private accounts tends to plunge precipitously when costs and trade-offs of these accounts are mentioned. The new Washington Post/ABC News poll provides more compelling evidence that this is the case and that, therefore, the level of "hard" support for Social Security privatization is quite low.

In the WP/ABC poll, there is a slight majority (53 percent) in favor of "a plan in which people who chose to could invest some of their Social Security contributions in the stock market". But when a followup is asked ("What if setting up a stock-market option for Social Security means the government has to borrow as much as two trillion dollars to set it up, with that money to be paid back over time through cost savings from the current system?"), that 53 percent is cut in half, so only 24 percent of the public winds up favoring private accounts if that kind of borrowing is necessary to set them up. That's bad news for Bush, since it appears that the administration plans to advocate just that sort of borrowing to set up these accounts.

Yet more bad news for the administration is the public's expressed interest in participating in such accounts if they were set up. Only 37 percent say they would personally put some of their Social Security money in such an account, given that they would "get higher Social Security benefits if the stock market went up, but lower Social Security benefits if the stock market went down." Significantly, people who don't expect to receive their full benefits from Social Security are no more likely to say they would participate in these accounts than are those who expect to receive full benefits. That undercuts one of the key selling points of the administration's plan.

So the public doesn't support private accounts, given the costs of setting up such accounts, and expresses little enthusiasm for participating in these accounts, even if they were available. If Bush is hoping for a groundswell of public opinion to push his privatization proposal over the top, he'd better think again.

Comments

He's hoping to scare the public into supporting his plans, a la Iraq. The advantage he had that time was that a lot of Americans wanted to lash out at Arabs--any Arabs--in the wake of 911, so they were open to persuasion. The advantage he has this time is that the relentless talk of "Social Security crisis" has eroded the public's support to some extent, since many are skeptical that they'll ever get benefits. It's not as strong a card to play as the post-911 anger was, so there's hope. Given the Democrats' disarray, however, I'd say he has a decent chance of prevailing. The real test is whether the Dems can wake up and finally start acting like an opposition party, and not get caught up in giving the Republicans fig leafs.

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Actually, check out Talking Points Memo - Josh points out that the Post wrote up the poll quite badly and that the numbers look better for the Democrats.

That is, of course, until they start the lying.

OK, but since when does this administration need informed public support to achieve its goals? And the goal here of course is not to improve investment opportunities or retirement benefits for retired Americans - it is to destroy a successful and essential government program as part of an ideological crusade to deligitimize all government programs that do not redstribute wealth upwards. They will lie and distort and dissemble to whatever degree necessary unless Democrats stand up and call this for what it is, and contesting the issue on this terrain - what the American people really want - is not what the fight is about.

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And? Not to be rude, but it appears to me that the general public is not going to be given a chance to express its opinion. Transfer of Social Security wealth to Wall Street is already scheduled to happen, and there will be a big "burst" of support at just the right minute to satisfy the media.

Cranky

Cranky, Allen and others.
There are big political and mechanical differences between Iraq and pushing Social Security Privatization through. Once the decision is made to go to war the nation is on a speeding train with no way to control the engineer. And all kinds of wells are tapped: general patriotism "we are at war", "support the troops". And once you are engaged in combat it is in many ways too late, there is no easy way to extract yourself.

Social Security is different. No one enlisted in the War on Social Security. It may be true that this president has the iron grip over his party and the media that you suggest, and that he will be able to ram some plan through even in the face of productivity numbers that suggest no crisis at all. I don't agree with the premises, but those are issues for another time.

The problem Bush and the Republicans face is time. Whatever plan is adopted, it will require months to actually put individual accounts into place and then to allow individuals to exercise whatever limited choices in investment vehicles they have. As the actual details of the plan start coming out, mainly the fact that future benefits even with returns on the private accounts will be much less than promised under the current plan, people will begin to murmer.

Now if they were able to maintain the sense of "crisis" they might sell this as being "better than nothing". But the only way to do this is to stop reporting economic productivity numbers altogether. 4.0% economic growth for 2004, already in the bag, simply blows the doors off the productivity models of the Social Security Trustees, not just the Intermediate Cost (which called for 2.7% in 2004 and 1.8% in 2005) that produces the 2018 and 2042 dates used by all, but all the Low Cost one that shows no long term shortfall at all (2.8% and 2.1%).

By June it will be clear that doing nothing would have been a better deal than doing something, particularly this something. And Republicans will be staring up a hill at 2006. They will be faced with having broken something that never needed a fix, lurching ever closer to that Third Rail of American politics.

The beauty is that there is no downside to cut and run here. There is no way that accounts will be set up by June and the US will have invested probably a few million dollars in staff time. The Republican Congress will have two choices: repeal it, or ride it into the Valley of Death that will be the 2006 midterms.

Bush may not care, he is not running for reelection, but the firmer he grasps that veto plan, the better for Dems in 2006.

Don't expect the polls to carry the day.

Bush is a lot smarter than most Democrats, and realizes that polls mean only present support. Once he's gotten out there and beat the drum for a while, the polls will change.

Unless Democrats respond in kind, with Kristoff's advice... reject it sight unseen and declare there is no Crisis.