Sunday, September 28, 2008

Around And Around

Dick Polman:

While on the stump in Florida last weekend, Obama contended that McCain's talk of Social Security privatization could leave seniors destitute: "If my opponent had his way, the millions of Floridians who rely on it would've had their Social Security tied up in the stock market this week. Millions would have watched as the market tumbled and their nest egg disappeared before their eyes."

Obama lied. No such nest eggs would have disappeared, because the McCain plan exempts every American born before 1950. I could also detail the Obama TV ad on Social Security that has been aired in Florida, Pennsylvania and five other states - it falsely claims that McCain favors "cutting benefits in half" - but here's the point:

Polman's wrong, as has been every very serious pundit who has tried to make this claim. While McCain's plan would be voluntary for people born after 1950, and presumably keeping promised benefits as they are under current law, as we know the benefits of current Social Security retirees are paid from current payroll taxes. Divert money out of the Social Security trust fund into stock funds, however you do it, and there's less money available to pay the benefits of current (and future, given accumulation in the Trust Fund) retirees.

Polman's argument only holds up if you just assume that benefits as promised under current law will be paid no matter what. If so, fine, and we can leave behind forever all arguments about the "solvency" of the trust fund. The fact is that the Bush/McCain plan would've diverted money which would otherwise go into the Trust Fund, money used to pay current and future benefits, into the stock market, leaving less money available to pay benefits.