Bush and Economy the Bush

Bush and Economy

THE BUSH ADMINISTRATION'S DOMESTIC INITIATIVES

The paper examines President George W. Bush's domestic policy of Social Security with regard to conflicting opinions on his mainstay approach towards Social Security. Entities presenting for and against opinions are then analyzed followed by personal conclusions. The policy is assessed in light of scholarly opinions comprising of a thorough evaluations of what it entails, its chronological tabulation along with its significance to Bush's Government. Further, the steps Bush has taken for the promulgation of his plan and the tactics he has adopted to garner support for the same are discussed. The entities responsible for implementing those policies are them identified. The opinions of various organizations, think tanks and policy makers are taken into account. The conflicting opinions are employed to form an independent opinion on the policies; to sum up these are matched with those of the White House. Finally the White House perception on the policy of Bush's policy of Social Security is then scrutinized and it is determined whether Bush has been successful in aptly executing his policy.

SECTION I: BUSH ADMINISTRATION

Social Security, America's largest and most popular government program is dismally the most troubled one as well. It is often referred to as third-rail of American Politics as any Government that aims to address it collapses. Michael Tanner in his book Social Security and its discontents notes that in the next 15 years, Social Security will begin to run a deficit (Tanner, 2004) which means it will be spending more on the benefits than it consumes through taxes. Presently the program is enduring about $26 trillion in unfunded liabilities. Therefore massive tax increase or benefit cuts seem to be the only solution for the sustainability of Social Security serviceability. Alongside, pay roll taxes are soaring so high that young workers are suffering from declining and diminishing returns upon the taxes they pay. However, despite being squarely unaddressed in the past polls today demonstrate a vast majority of Americans supporting the idea that would allow younger workers to privately invest part of their Social Security taxes through individual accounts. In his previous term May 2001, George W. Bush appointed a commission in view of strengthening Social Security by formulating proposals that would uphold Social Security's promise for retirees while also improving the promise of younger workers through personal accounts (Tanner, 2004).

On August 2001, the commission came up with its interim plan outlining the state of current program. This report bred considerable controversy mainly on the Social Security Trust Fund and the overall undertakings of the plan. The commission however, submitted the final recommendations to the President in December 2001. It comprised of three separate reform proposals that were based on personal retirement accounts; each individual was required to pay benefits as high as the current program at a lower long-term cost. This also aimed at providing workers with the opportunity to build assets and wealth in their personal accounts which they would control and own.

The Plan 1 of commission proposal dealt with workers investing a portion of their Social Security payroll taxes voluntarily, in a personal retirement account. Since it made no other changes in the system, it was politically attractive for a short span of time but carefully avoided any long-term concerns. However, this accounts-only approach would pay higher benefits to the retirees while also reducing long-term general revenue costs by as much as 8% in comparison to the previous prevailing Social Security Plan.

Plan 2 enabled workers to voluntarily invest 4% of their wages of at least $1,000 while providing for traditional benefits for the newly retired individuals in place of increased prices rather than an increment in wages. This aimed at making the Social Security indefinitely sustainable by reducing the long-term general revenue costs of supporting the program by 68% and paying higher benefits to retires than previously done.

Plan 3 comprised of a combination of 'add-on' and carve out' accounts in which a worker who invested voluntarily an additional 1% of his wage may forward 2.5% points of his pay roll taxes up to $1,000 yearly which meant benefit for the people promised by Social Security along with relieving 52% of pressure on general revenues compared to the current program.

The above two plans provided conspicuous and attractive new protections for the most vulnerable Americans. These plans guaranteed a retirement above the poverty line to 30-year minimum-wage workers. This guarantee also lifted upto one million retirees out of poverty by 2018. As for the lower-wage individuals survivor's benefits would be increased to 75% of the couple's earlier benefits. This also increased benefits for 2 to 3 million retired women. The commission's plans also incorporated divorcees for the first time. All in all these plans especially the reforms based on personal accounts are unequivocally beneficial to Americans with lower wages.

There are a number of reasons as to why the Bush government was compelled to consider the shelves of studies promoting privatization of retirement accounts by the conservative think tanks in hope of the right candidate who could be persuaded in adoption of these ideas. As Larry Lindsey, the chief economic adviser calls the President, 'natural conservative reformer' Bush turned out to be bold enough to try something radically different from before. Cogan the senior official in President's Reagen's Office Of management and budget and a Hoover institution economist, notes that three influences were responsible for compelling Bush to manifest his privatization leanings. One fact was that 'baby boomers' were to begin retiring in eight years bringing Social Security closer to fiscal calamity than ever before. Secondly the recent Social Security surpluses have enabled politicians to 'talk' about reforms without intimidating current beneficiaries. And lastly as a consequence of widespread use of 401 (k) accounts and IRAs there is an increasing number of new investors this has made the idea of personal saving accounts more attractive and palatable to the nation.

There are other reasons for Bush to pursue with this privatization of National Security as Bush Strategist Karl Rove comments: "He does not want to be the kind of president who sits in the Oval Office wondering 'How do I react to the in box?'" says top Bush strategist Karl Rove. "If you don't lay out the big things you want to do, you'll be driven by the nightly news -- and this is one of the big things he wants to do" (O'Beirne, 2000). Alongside being a compassionate conservative politician Bush would favor personal accounts even in the absence of crisis in Social Security Funding. Reason being, he wants the low and moderate income bearers to build wealth. Bush is also very passionate about helping the recent immigrants succeed in America.

Bush garnered ample support in this regard by taking the case directly to American people after arguing on it in State of the Union's address (Sammon, 2005) In January 2005, Bush planned to lay out concrete initiatives upon the partial privatization of Social Security:

I'll ask the House and Senate to act soon on the issue of Social Security so that we don't pass a bankrupt system on to our children and our grandchildren" (Sammon, 2005)

By May 2000, Bush had already garnered public support; even the think tank AARP which has been hostile to an ideas long persisted by traditional conservatives and libertarians, were of opinion that Bush proposal was a positive attempt at changing the precarious Social Security status. As Evelyn Morton, a legislative lobbyist at the AARP said:

We welcome it as an option to look at. We think the idea should be put on the table and discussed and considered" (Lambro, 2000) Apart from the pro-partial privatization think tanks like Heritage Foundation and Cato institute, many democratic organizations have also impressed their affinity and support to Bush's plan. This signals the shift, according to some analysts, of the center of political gravity near the Right in social welfare policy. For instance the Democratic Leadership Council which has been making efforts since 15 years to move The Democratic Party towards the fulcrum of politics actively promoted Bush's new stance on National Security. Senator Kerry also expressed his support in May 2000:

He listened respectfully and indicated that he intends to make it a central part of his campaign," Mr. Kerrey said after the meeting with Bush in May 2000.

SECTION II: ARGUMENTS FOR AND ARGUMENTS AGAINST The two main think tanks appreciating Bush's stance on National security are The Heritage foundation and Cato institute. While many democratic or anti-traditional conservative and libertarian elements squarely oppose the same. The arguments for and against of the aforementioned think tanks are scrutinized henceforth.

The two major conservative think tanks have completely embraced President Bush's proposal to fix Social Security's long-term insolvency. The officials at the Heritage Foundation and the Cato Institute said they liked Mr. Bush's strategy of slowing down the program's shooting costs by changing the way increasing Social Security retirement payments in the future, are now calculated for middle and upper income workers: " We very strongly support it "This would do two things, both of which are critical. First, this brings Social Security's promises close to what Social Security can afford to pay. Second, this focuses benefits on people who need it the most, the ones who are least likely to have other types of retirement plans." says an analyst at the Heritage Foundation, David John (Lambro, 2005).

It is believed that people making about $110,000 or more would have benefits based on price increases which in turn tend to rise more slowly than wages while benefits of people making $25-000 or less would continue to be calculated on wage growth. Mr. Michael Tanner, Director of the Cato's Social Security privatization project, is a little apprehensive is however all the more optimistic:

like it. Something has to be done to restrain the growth of benefits. Personal accounts help solvency, but they don't solve the entire problem. This seems to be the best of a lot of tough choices."

It is believed that the program would be expected to be financially solvent for the foreseeable future. Conservatives are of opinion that this proposal could appeal lawmakers to look for a way to keep the system solvent for long-term without adding much debt.

Bush seems to be very determined and ready to pay whatever price attaches to the proposal. According to several sources, Bush insisted on handling Social Security in a tough, no-nonsense way.

The proposal has attracted grave criticism from opponents of personal accounts. What the proposal did not include was how to keep the Social Security solvent and sustainable in the long-term in case of the absence of personal accounts. This is followed by another debate on part of account opponents to discuss what the public and policy makers want.

The republicans are genuinely vulnerable on the tax cut and n the Social Security; conservative democrats on one hand have set off an odd collision, by aiming to wipe out the democrat's legacy as the part of "tax and spend." This is because the Democrats signature programs are null and void if 'tax and spend' is taken out of the picture. Social security raises trillions of dollars from payroll taxes in order to spend it on secure retirements. Similarly Medicare and Public education are tax and spend too. Bush's opponents believe that as a party one must not make issues of defense, social security and as their central foci for mere political maneuvering. The two implications with Bush National security is how to keep social security solvent and secondly how to think about budget politics in the short-term. The former has been squarely ignored by the Bush administration.

Robert Dreyfuss writes in the American Prospect in June 2001 that the plan would have to include painful choices about how to pay for the plan and including swallowing up $1 trillion or more of the projected surplus to cut benefits for the future retirees voluntarily. Many analysts point out that diverting 2% of the social security tax to pocket private accounts is rather a start down to a slippery slope that will turn the system into a two-tiered affair wherein wealthy tax payers opt for private accounts to add-on to savings and private pensions, while poor and working class taxpayers stuck with a social security system that pays reduced benefits. "I think it's unlikely you'll see the Full Monty," says Michael Tanner of Cato. "But it could go beyond 2%." Moreover, Thomas R. Saving of Texas A&M University has on record pronounced the Social Security "an illegal pyramid scheme," saying that: "We must destroy Social Security, as we know it, in order to save it."

Also the Clinton administration, while opposing the creation of personal accounts has also disapproved of Mr. Bush's plan, declaring it too sketchy and viable of pushing the program towards insolvency. (Dreyfuss, 2001).

Some analysts point out that months earlier than the issuance of aerial bombardment in Baghdad (March 19, 2003), Bush Government launched the National Security Strategy of United States of America on September 17, 2002 announcing substantive shift in America previous policy. Unclassified versions of National Strategy to Combat Weapons of Mass destruction had been released on December 11, 2002. Both these were subject to grave criticism controversy because of its obvious connection with war against Iraq. (Himes, 2004)