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White House Still Wants Private Accounts

AFSCME and our allies believe Social Security's problems are manageable — and a long way off. Other national problems seem far more pressing, such as soaring health care costs, vanishing jobs and out-of-control budget deficits. Instead of dealing with these immediate crises, however, the President is focused on Social Security. Here are the major components of his plan:

PRIVATIZATION: Workers under 55 could earmark a third of their Social Security contributions (4 percentage points out of the total worker/ employer contribution of 12.4 percent of pay) for potentially risky private investment accounts. At retirement, Social Security benefits would be cut in direct proportion to an account's size, with the government taking back 70 cents in benefits for every dollar in an account (called the "clawback"). These accounts clearly aren't add-on benefits — they're designed to replace a big part of Social Security.

The President admits that privatization won't solve the system's future shortfall (but he believes it's a good idea anyway). In fact, diverting payroll contributions from Social Security to private accounts actually means less money for benefits, as well as a bigger shortfall that shows up long before 2041.

NEW BENEFIT FORMULA: Most workers (incomes above $20,000) would see their future benefits reduced even if they don't choose a private account. That's because President Bush wants to change the benefit formula. By switching from today's wage-indexed formula to one based on prices, future benefits would be reduced by 20 to 50 percent (wages tend to grow faster than prices). Workers who do opt for an account would be hit twice — with this cut, plus the clawback.

Remember that not just retirement checks are at stake: Social Security benefits also go to disabled workers and their families, and the surviving families of deceased workers. People often forget that Social Security is the best life insurance policy most families have — with a value of over $350,000 to the average worker.

President Bush says his plan would not affect current retirees, or workers over 55. But many experts aren't so sure. The box above has information on how the Bush plan could affect you.

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