Summary

In his State of the Union Address, President Bush said again that the Social
Security system is headed for “bankruptcy,” a term that could give the wrong idea.
Actually, even if it goes “bankrupt” a few decades from now, the system would still
be able to pay about three-quarters of the benefits now promised.

Bush also made his proposed private Social Security accounts sound like a sure
thing, which they are not. He said they “will” grow fast enough to provide a better
return than the present system. History suggests that will be so, but nobody can
predict what stock and bond markets will do in the future.

Bush left out any mention of what workers would have to give up to get those private
acounts — a proportional reduction or offset in guaranteed Social Security
retirement benefits. He also glossed over the fact that money in private accounts
would be “owned” by workers only in a very limited sense — under strict conditions
which the President referred to as “guidelines.” Many retirees, and possibly the
vast majority, wouldn’t be able to touch their Social Security nest egg directly,
even after retirement, because the government would take some or all of it back and
convert it to a stream of payments guaranteed for life.

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