May 10, 2005

Reid's Statement on Bush's Risky Privatization Scheme

Benefit Cuts for Middle-Class Seniors While Making the Problem Worse is a Bad Plan

Democratic Leader Harry Reid released the following statement today:

“Today we have compelling new evidence that the President’s risky privatization scheme is a bad deal for American workers. Not only will the President’s plan drastically slash guaranteed benefits for middle-class seniors, eliminating these benefits entirely for some, but it will make Social Security’s financial challenge worse. Even with his endorsement of the largest benefit cuts in the history of Social Security, the President’s insistence on private accounts means his plan would drive Social Security into insolvency 11 years earlier. This so-called cure is worse than the disease.”

“The President wants to replace Social Security’s guaranteed benefits with a gamble. But American seniors and workers will not accept historic benefit cuts. Not only does the president’s plan make the system’s problem worse, it will require trillions in new debt, largely borrowed from foreign countries like China and Saudi Arabia.”

“The President’s privatization plan doesn’t strengthen Social Security, it weakens it. Democrats are committed to strengthening the program and will work to find ways to address Social Security’s long term financial challenge while also encouraging Americans to save and taking other steps to enhance retirement security.”

BUSH’S BENFIT CUTS AND DEBT ARE A BAD PLAN FOR AMERICA

The President’s Plan Will Make Social Security Insolvent Eleven Years Earlier. “The President’s private accounts…would accelerate the date on which Social Security begins to have a cash-flow deficit, as well as the date of insolvency, because establishing the accounts requires diverting large sums from Social Security to the accounts. When the sliding-scale benefit reductions and the private accounts are considered together, the plan is found to move forward the year in which Social Security would become insolvent from 2041 to 2030. This result could be averted only by large cash transfers from the Treasury or additional benefit reductions or tax increases. The plan also would accelerate the year in which the program begins to run cash-flow deficits from 2017 to 2011.” [Center on Budget and Policy Priorities, 5/10/05]

The Bush Benefit Cut Would be the Largest in History for Middle-Class Seniors. “The 1983 Social Security reform, for example, lowered benefits for average workers by 17 percent, with the reduction phased in over 46 years.” Under the president’s proposal, two benefit cuts will impact middle-class seniors – the indexing cut and the privatization tax for those who contribute to a private account. “The combined effect of progressive price indexing and the President’s private accounts would be to reduce Social Security defined benefits by 73 percent for medium earners and 97 percent for the so-called ‘high earners’ [whose earnings today average about $59,000].” [Center on Budget and Policy Priorities, 5/4/05; 5/2/05]

Despite These Record Benefit Cuts, the President’s Plan Closes Only 30 Percent of Social Security’s Solvency Gap. “The President’s sliding-scale benefit reductions, by themselves, would close 59 percent of Social Security’s long-term funding shortfall…When the private accounts are added in, however, the President’s plan as a whole is found to close only 30 percent of the 75-year gap. More than two-thirds of the gap would remain.” [Center on Budget and Policy Priorities, 5/10/05]

The Bush Plan Will Create $5 Trillion in New Debt. “[T]he President’s plan, including both the private accounts and the sliding-scale benefit reductions, would add about $5 trillion to the debt (i.e., the ‘debt held by the public’) over the first 20 years the plan was in effect”. [Center on Budget and Policy Priorities, 5/10/05]

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