Henry Aaron, a noted health care expert and senior fellow in economic studies at the Washington-based Brookings Institute, notes in his latest analysis that as bad as the current financial chaos is, it could have been catastrophic had a partially-privatized Social Security system been in place.
When President Bush won a second term, he strongly advanced a proposal to divert a portion of payroll taxes into personally owned savings accounts. These accounts were to be invested in privately traded assets — portfolios of stock or bonds.
Aaron points to the argument made at the time by Bush that privately traded bonds and stocks had for decades earned higher returns than Social Security pensioners received from their amassed contributions.
There was further assurance from the president and his advisers that the personal accounts would support benefits that would more than make up for the built-in benefit reductions that would come with the plan.
Fortunately, notes Aaron, no bill incorporating the presidents proposal ever made it to the floor of either the House or the Senate.
”As American financial markets are hammered by a financial storm more frightening and more damaging than Hurricane Ike, it is worth imagining what the world would have been like had President Bush’s Social Security proposal been enacted and been effective for a couple of decades,” says Aaron.
Aaron paints a grim picture of an imaginary future with the partial privatization plan enacted.
People have been socking away funds in individual accounts for years. Social Security benefits have eroded continuously. Citizens will have adjusted their consumption and savings to leave themselves with savings that they expect to be sufficient for retirement.
Af | 
