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Away From Home

Tuesday, June 21, 2005

Social security privatization punishes the poor

Interesting article in the Manhattan Mercury:

Most proposals for private accounts, including those of the president's 2001 Social Security Commission, require that the majority of lower-income individuals convert their investments to a monthly annuity at retirement. Annuitization means that the assets in an account are converted to a stream of monthly payments; the payments end when the owner and spouse both die. Upon death, the balance reverts to the government. Nothing is available for children and other heirs.

For the rich and upper middle class, the story is different. Most will be able to keep their personal accounts to pass on to heirs or use as they please. Persons in middle-income groups can keep part of their personal account but will have to annuitize perhaps 60 percent of their accumulation.

Why the different treatment of the rich and poor? Let me quote the Social Security Administration. "Mandatory annuitization is designed to ensure that account holders do not draw down their balances too quickly, thereby risking impoverishment or becoming a burden to ... government antipoverty programs." That is, lawmakers and the president's commission are afraid the poor and middle class will waste a personal account and become a burden on wealthier taxpayers.

If a person's basic Social Security does not yield a monthly benefit above the poverty level (as defined by the Social Security Administration), then the private investment account must be converted to an annuity. For the poor and many middle-income persons, the only certain way to provide heirs an inheritance from private accounts is to die before retirement.

(Note: The author, Ed Olson, is an associate professor emeritus of economics at Kansas State University.)

That's right. The rhetoric being spouted by BushCo is patently false. Bush and the rest of the propaganda rakers continually cite the poor as being the "big winners" when, in actuality, they're the big losers. And not only that, but it's designed to be that way.

Why is this? Because wealthier people might end up helping out someone in need, which is obviously an unbearable tragedy.


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