Logical Analysis

So, President Bush wants to overhaul the US Social Security program?

In typically ideologue fashion, he wants to restructure it so it is based on 'user pay' style plans:

"We must make Social Security permanently sound, not leave that task for another day," Bush said.

He said the best way of reaching that goal is through a government-run program of "voluntary personal retirement accounts" that would have a "conservative mix of bonds and stock funds."

There's a problem here. Right now, the Social Security plan in the US is based on what amounts to a payroll tax. Employers pay it directly on behalf of employees. Making it a 'voluntary' program guarantees that a lot of people will just opt out.

The wealthiest won't particularly need it, so they will opt out. (Why should I pay into something I don't need, therefore, I'm not going to!).

The middle class families will opt out. Why? Because a lot of them will make similar assertions to the wealthy, or they will believe that they can achieve better returns through different investment vehicles.

That leaves the poor - in particular - the working poor holding the bag. They won't participate actively because they can't afford to. It takes every nickel they earn to survive month to month. These people don't save because they are in situations that preclude saving anything other than a few dollars now and then, which gets eaten up by routine emergencies - like the kids getting sick.

So, what we have here is effectively a tax cut for businesses. Coincidentally, the people at the top of the large corporate ladder (today's economic elite), get to opt out of paying into a program that they consider wasteful because they see no benefit for themselves.

Unfortunately, this lovely little plan of George Bush's (or his collection of henchment - whoever cooked up this scheme) is guaranteed to have exactly one result - many more poor people destitute in retirement. The poor get poorer in this system; the rich get that much richer.

The problem with the US Social Security system is not sustainability - as much as GWB and Co. would like us to believe. It is the fact that the very payroll taxes used to fund the program drop into 'general revenues', and are then looted by the politicians for whatever hair-brained scheme they can cook up this month. (Like invading Iraq...)

Canada went through a similar crisis a few years ago. People started to panic that the CPP plan was no longer "sustainable" into the future. Our government responded to this quietly, and effectively. First, CPP funds land in a separate set of accounts from the Government's "General Revenues" bucket. Second, they established a group whose job it is to invest CPP funds aggressively so that they grow well in excess of the rate of inflation. Today, those people have parlayed a few hundred million in surplus CPP funds into some $30 billion and counting.

If Bush gets his way (or Ralph Klein in Alberta, for that matter), in 30 years or so, the US will be in a situation that is ripe for a revolt originating in its poorest neighborhoods. Around about that time, people my age will be retiring, and if they've been living on the edge as it is, they won't have much to support them. Poor families will suddenly find themselves not just caregivers for their parents, but providers for them. Those already on the edge financial disaster may well go over it, and in sufficient numbers, could well form the body politic needed to foster armed uprisings.