If it ain't broke, don't privatize it. Social Security, that is

If you haven't noticed, President Bush decided to touch the "third rail" of American Politics. He's been talking about privatizing Social Security. Except he's using every term but "privatizing", preferring the term "private accounts". But what it boils down to is to toss our retirement dollars into the stock market and gamble, but if the last four years hasn't taught us to be careful about the stock market, then what else would?

Recycled rhetoric Bush's huge gamble on dismantling the cornerstone of the New Deal will fail. And if the Democrats remain disciplined, his defeat will be profound. (By Sidney Blumenthal, SALON.COM, March 3, 2005)

First we have a history lesson. It seems that the "Social Security is unworkable and fundamentally flawed" claim is not new at all. Instead the claim has been circling around the Republican Party since 1936, and has been repeated by several Republican Party figures through the years. It's no doubt the failure of those prior claims that has led us to regard Social Security as the third rail of American Politics, because several generations of Republican leaders have killed their political careers over this issue.

But when Reagan became president he jettisoned his denunciation of Social Security. In 1983, he signed a bipartisan tax and benefits bill extending its solvency until 2060. The ultimate conservative had used anti-Social Security rhetoric to galvanize his conservative base to gain office, but as president he joined his Republican predecessors in supporting the system. With that, he took the issue off the table for years. In 1996, Sen. Bob Dole never mentioned a word against Social Security, proud of having been a co-sponsor of the 1983 bill Reagan had signed.

...Bush's impending defeat on Social Security is no minor affair. He has made this the centerpiece of domestic policy of his second term. It is the decades-long culmination of the conservative wing's hostility against Social Security and the Democratic Party. Projecting images of Roosevelt and Kennedy cannot distract from Bush's intent to undermine the accomplishments of Democratic presidents. The repudiation of Bush on Social Security will be fundamental and profound and will shake the foundations of conservative Republicanism. Bush's agony is only beginning, if the Democrats in the Senate can maintain their discipline.

While it's delicious to consider Bush dying in a self-made immolation ...

Let us turn to ten myths about Social Security. It's published by The Social Security Network, an informational resource about the Social Security program operated by The Century Fund.

What they've done is collect all the Republican claims that the Social Security system is due to collapse, and refuted every one.

They've also published a list of 12 reasons why privatizing Social Security is a bad idea.

We also have to consider how accurate are the claims made by the Bush administration. Apparently to justify the claim that the system will fall apart in 2042, they have to assume horrible U.S. economic performance in terms of GDP growth rate. How bad? It would be the worst economic performance since the 1930's, that is how bad. So, if our economy were to be that bad wouldn't a privatized account whose growth depends on the stock market also perform badly?

I gathered all this from a Flash animation titled "If it ain't broke, don't privatize it!", which won MoveOn's contest to make an animation explaining why the Social Security proposals are just plain bad.

The most interesting point from the animation is the cap. Social Security is taxed at a fixed rate on your income, for up to $90,000 of your income. If you make more than $90,000 income, you pay a maximum of around $5800 in Social Security. Even if you make $zillions per year, all you are taxed for Social Security is the $5800.

The simplest way to "fix" Social Security is to simply raise the cap.