Speaking of private accounts, would they solve Social Securitys woes?
No. President Bush is pushing for private retirement accounts within Social Security as a means to sweeten the system for younger workers, and not as a fix for any looming financial crisis. Theoretically these accounts would not affect Social Security’s long-range finances. True, workers would be paying less in payroll taxes into the traditional system, but they would get correspondingly smaller benefits when they retire. The difference — plus something extra, according to proponents — would be made up by the superior investment gains of private accounts. But in the short run, private accounts would make Social Security’s cash flow problem worse. Social Security depends on the contributions of younger workers to pay today’s retirees; if some of that money were held back for individual private accounts, the government would somehow have to make up the difference. Most likely, that would mean more borrowing — 1 trillion or more over the next 10 years.
