looks at how the big financial institutions stand to make a fortune from new plans for social security. THERE HAVE been numerous attempts and proposals to privatise the social security system. It Was key Republican platform item in the 2000 election.
The idea was subsequently thwarted by the stock market bust that wiped out $8 trillion of market value, and caused a
percent drop in the NASDAQ over the first half of Bush's initial term.
Once the market appeared healthier and Bush had another election under his belt, however, privatisation was back on the table.
The main underlying argument posed by the administration is that individual retirement money would be better off invested outside the systelL.
The administration is spinning the idea that anyone with an Internet connection and a financial advisor could do better on his or her own then either the social security system or the government. Financing the Deficit
Lost in the debate is the fact that the system is actually operating at a surplus. Old Age Survivor and Disability Insurance (OASDI) is the largest social insurance programme run by the Social Security Administration.
The programme provides monthly benefits that are designed replace lost income due to retirement, disability, or death.
About 96 percent of the jobs in the U.S. are covered by OASDI through a payroll tax which currently registers 15.3 percent.
According to the 2004 OASDI Trustee Report, the total amount coming in is $632 billion and being paid out is $479 billion, representing a surplus of $153 billion. recourse for those who received misleading financial advice
A little over half of that surplus represents interest payments the system is supposed to receive from social security bonds.
Now Alan Greenspan (Chair of the Board of Governors of the Federal Reserve) is leading the warning chatter about the social security system running too much debt.
He argues that in order to come up with the money it would have to be extracted from taxes, more borrowing, raising the retirement age or cutting future benefits and cost-of-living increases.
The cost of restructuring the programme reflects the losses that would be incurred by deflecting payroll taxes outside the system.
The result would be an immediate rather than future claim on the social security fund, which would grow rapidly as more people will be retiring.