Social Security Privatization Plan Buried in 2007 Budget

The Wallstreet editor for Newsweek points out that President Bush slipped a doozy into the 2007 budget, and did so with no fanfare. The plan would begin in 2010 and "would divert more than $700 billion of Social Security tax revenues to pay for them over the first seven years." The only mention of Social Security in last week's State of the Union address was that Congress did not act on his plan; however, he never submitted specific legislation.

I, for one, am tired of legislating by appropriation. Appropriations should be tied to legislation, they shouldn't supplant it.

Unlike Bush's generalized privatization talk of last year, we're now talking detailed numbers. On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion.

In the first year of private accounts, people would be allowed to divert up to 4 percent of their wages covered by Social Security into what Bush called "voluntary private accounts." The maximum contribution to such accounts would start at $1,100 annually and rise by $100 a year through 2016.

It's not clear how big a reduction in the basic benefit Social Security recipients would have to take in return for being able to set up these accounts, or precisely how the accounts would work.

On Wednesday, House Republicans rebelled against the budget proposal which would eliminate "a $255 lump-sum death benefit that has been part of Social Security for more than 50 years. It also urges Congress to cut off monthly survivor benefits to 16- and 17-year-old high school dropouts, which would be reinstated when they turn 18."

In addition, Bush wants to eliminate estate taxes -- conservatives call this a "death tax":

Starting in 2001, Congress began to gradually increase the size of an estate that would be exempt from tax. By 2009, estates of $3.5 million or less ($7 million for a couple that does the smallest bit of planning), would be tax-free. By 2010 all estates would be exempt from the tax, but only for one year.

So President Bush wants to permanently free all estates from the tax starting in 2011. The estimated annual cost: in excess of $50 billion in 2012, rising to more than $70 billion by 2016.

Note: this is a deficit budget. The interest on the national debt in fiscal 2005 was $352 billion.

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