The genius of Social Security has been its intergenerational financial leverage. Virtually all of current FICA contributions went to current retirees from the 1930's until the Reagan era. Reagan's "Social Security Commission" chair, Alan Greenspan then oversaw a 22 percent increase in FICA rates that was "invested" in "loans" to Congress, but today STILL five-sixths of current FICA goes to current retirees.
Now the Rethugs want to change all that. THEY SAY they want to shift the one-sixth of FICA that goes to the "Trust Fund" into "privatized accounts", and then let that one-sixth grow to six sixths, but who ultimately will get the proceeds of those funds? INSURANCE COMPANIES!
From a leaked embargoed briefing the afternoon before the SOTU address:
"Q So, ... people will have annuitize, literally buy an annuity somewhere?
SENIOR ADMINISTRATION OFFICIAL: Right. We think it's very important that people not be in a position where their personal account money is withdrawn and it have the effect of pushing people into poverty....
SENIOR ADMINISTRATION OFFICIAL: Well, basically, the way that we have outlined it, the federal government would do the purchasing of the annuity contracts, so it would still be sort of -- this would still be channeled through the federal government, the purchase of the annuity. People wouldn't be out there shopping on their own for a private sector annuity.
Q But if you bought it from an insurance company then, the insurance company would take the risk, but they would also get the account if somebody died early -- right? I mean, that's how it works?
SENIOR ADMINISTRATION OFFICIAL: Yes, exactly."
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Under the current system, ultimately RETIREES get ALL the proceeds from all of FICA contributions and ALL Trust Fund investments. But emerging details indicate that, under Republican Social Security "reform", ultimately INSURANCE COMPANIES will get the proceeds of "privatized accounts", for all but the very wealthiest people who pay FICA taxes (at rates below the 12.4 percent the vast majority of workers pay).
ONLY THE WEALTHIEST would have any prospect of "owning" their "privatized" accounts and passing them on to heirs. Everyone else would give up guaranteed benefits, take on stock market risk, presumably receive lower benefits than they are guaranteed now, and pass on their account TO AN INSURANCE COMPANY, rather than to the next generation of American workers:
"they would not be able to withdraw money from their account to such a degree that by doing so they would move themselves below the poverty line. In other words, there would have to be a sufficient amount coming to them, in terms of a monthly inflation index benefit stream, from the traditional system and the annuitized portion of their personal account to be able to fund a poverty-level benefit. Now, to the extent that their personal account enables them to have total benefits that are higher than that, they would have flexibility over the disposition of those funds."
See "HEADS UP: Embargoed White House Social Security briefing", at
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x3046059
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