Private account:  Is it really a bad idea?

Part of the President's plan to fix Social Security is for payees into the system to have the option of placing some of their funds into a private, government run account.  This idea is not new and in fact was originally considered during the time the program was created.  One of the biggest proponents of such accounts was Democratic icon Daniel Patrick Moynihan.

Moynihan saw Social Security reform as an opportunity to give ordinary working Americans an opportunity to save and invest the same way that higher-income people can—"A measure of wealth," as he called it. He understood that wealth in America no longer comes exclusively—or even primarily—from wages, but from investment. Roughly 52 percent of Americans now invest privately. But nearly half of Americans, mostly low- and middle-income workers, still are not able to participate in this route to financial wealth. This is not surprising. After paying for food, rent, medical care, and other expenses of daily living, many Americans simply don't have much money left over to save and invest.

That is why Moynihan supported proposals to allow younger workers to privately invest a portion of their Social Security taxes through individual accounts. To Moynihan, this was not just reform of Social Security, but its logical completion. As he wrote in the New York Times several years ago: "In 1944 the British came up with the slogan of 'cradle to grave' protection. We propose something beyond: an estate! For doormen, as well as those living in the duplexes above."

So if private accounts are so opposed by our elected officials, one has to ask "why?".

(1) Because President G.W. Bush is proposing it.  Believe it or not this may be the key reason why politicians, especially Democrats hate the idea.  Ironically the "private account" approach was launched recently by two Democrats, Moynihan and Bob Kerry and reported on in the San Francisco Chronicle.  In the article its states, "It's the liberals who can destroy Social Security by preventing any change,'' Moynihan said.

Adding to this, Ed Kilgore, political director of the moderate Democratic Leadership Council, said, "For progressive Democrats, the Social Security payroll tax is the worst tax in America. It hurts exactly those people that Democrats are supposed to be speaking for. . . . If you could just magically wish for a tax that you'd want to reduce as a Democrat, this is it.''

Therefore why are Democrats so much against even talking about some type of private account option.

(2)  Americans will lose millions in "private accounts".

If this IS the case and IS such a bad idea, why do our elected officials have the option (federal government has something called the Thrift Savings Plan. 10 percent of their salary -- the federal government will match the contribution. There are three plans: One is government bonds; one is a fixed income; one is the market) when the people they represent don't?  Are politicians really financial wizards and the general public complete fools when it comes to managing money?  We doubt it. Politicians are far from right to call themselves "financial wizards".

(3)  Government won't have access to the Social Security Trust Fund.

This maybe the biggest truth of all.  First of all there is no real "Trust Fund", a separate account where all the monies contributed over the years are kept.  In reality the federal government has spent it.  The government backs the program with IOU's that are paid back with by YOUR taxes.  Private accounts could lead to a "hands off" YOUR money if private accounts are established.

So for any, repeat any, politician to completely discount the idea of some sort of optional private account, one needs to ask the question "What is their real political motivation?"