CALIFORNIA YANKEE

Race, Gender Factors For Social Security?

The Associated Press via MSNBC reports that on NBC’s “Meet the Press,”Congressman Bill Thomas, R-Calif., the chairman of the House tax-writing committee said Congress also should consider basing benefits on such factors as race, sex and the job a retiree once held:

“We also need to examine, frankly, ... the question of race, in terms of how many years of retirement do you get based upon your race. And you ought not to just leave gender off the table, because that would be a factor,” Thomas said.

You've got to be kidding me. What could possibly be the justification for basing Social Security bennefits on race?

Details Of Social Security Reform Leaked

Speaking on condition of anonymity, one of those infamous administration officials revealed some of the details of President Bush's ideas for Social Security Reform.

The Associated Press reports the size of the private accounts could be similar to those in a proposal by Senator Lindsey Graham, R-S.C., and the main plan from Bush's 2001 Social Security commission:

The White House cautioned Tuesday that Bush had not decided on a specific plan.

But the administration is leaning toward letting workers divert 4 percentage points of their 6.2 percent in payroll taxes - almost two-thirds - into investment accounts, up to $1,000-$1,300 a year, the official said. The remainder of the workers' payroll taxes would continue going into the system.

Graham's plan calls for annual contributions to be capped at $1,300, while the commission proposed a $1,000 cap.

The more difficult aspect of any reform will be the financial tradeoffs. According to the Associated Press, any reform proposal will likely cut traditional benefits for younger workers to help fund the future shortfall, with returns from the private accounts expected to cover, but not guarantee, the difference. Then there is the issue of the estimated $800 billion to $2 trillion shortfall over 10 years caused by diverting payroll taxes into the proposed private accounts:

In the main plan offered by Bush's commission, promised benefits would be cut for many workers, with reductions ranging from 0.9 percent to 45.9 percent. Investments in the personal accounts are counted on to make up the income loss.

Growth in benefits would be slowed dramatically by tying them to inflation rates instead of wages. The rate of inflation grows more slowly than wages over a person's lifetime.

Income from the worker's private account, funded with a portion of their Social Security tax, would be expected to at least make up the reduction in benefits.