The Nation has a pretty decent editorial that explains how the “personal” Social Security accounts would work —:
[Y]our payroll taxes will still be used to cover the benefits of current retirees, but under Bush’s scheme the government will place a certain “diverted” amount into an account in your name. It sounds like a personal retirement account, but it’s not. It’s a loan. Because if your account does really well (above 3 percent), when you retire the government will deduct the money it lent you (plus 3 percent interest) from your monthly Social Security check leaving you with almost the same amount you would have received under the current system. If your account does really poorly (below 3 percent), you are out of luck. According to Congressional Budget Office, the expected average return will be 3.3 percent, so the net gain will be zero.
But it gets better, because in the restructuring they will have to borrow $4 trillion dollars to cover the shortfall that the transition with create:
So our government will have to borrow that cash. And if the last three years are any guide, our largest single loan officer will likely be the Central Bank of China. And who runs China’s Central Bank, China, and the Chinese people with an iron fist? Why, it’s our old friends, the democracy-loving, freedom-marching Chinese Communist Party. So Bush’s personal retirement accounts=private retirement accounts=US government loans=US government borrowing=Chinese government lending=Chinese Communist Party loans.
Don’t pay attention to the details behind the curtain, we’re just swapping one crisis with another more dangerous one.
Of note is that the editorial also brings up the issue of naming, saying that “the Republicans tested the phrase private accounts and found public support was much lower than when the same, exact, identical concept was called personal accounts… [they] push the phrase personal accounts and chastise anyone in the media who employs the banished words…” This jives with Reason’s Hit & Run posting of a White House email that I covered earlier:
?Ã„ÃºEvery day, we fight reporters and Democrats for using the term ?Ã„Ã²privatization?Ã„Ã´ b/c every poll worth its salt shows it frightens the public.?Ã„Ã¹ Their response: ?Ã„ÃºStill, it?Ã„Ã´s true that the contributions, investment choices, and withdrawals all would be regulated, so Crist has a point. Maybe ?Ã„Ã²forced, socialized savings accounts?Ã„Ã´ would be a better description, although I?Ã„Ã´m not sure how well it would poll.?Ã„Ã¹
Perception is reality when it comes to the language-meisters.