Yves Smith | October 19 2016 | Naked Capitalism
Readers may recall that Bill Clinton planned to privatize Social Security in the second term of his Presidency. The Monica Lewinsky scandal derailed his plan.
As the Clintons knew, only a Democrat can dismantle Social Security. Hillary looks to be picking up where Bill left off. As David Sirota describes in a must-read story, Hillary is planning to introduce mandatory retirement accounts, a scheme that Hillary has mentioned in high concept form earlier. As details emerge, this “enrich Wall Street at the expense of everyone else” program is even more attractive to pet Democratic party constituencies than the 1.0 version of going after Social Security directly. No one in the Clinton or George W. Bush administration was so audacious as to cut in private equity and hedge funds in the way this variant would.
But Hillary, and her major advisor on the plan who is also on her short list of Treasury Secretary candidates, Blackstone CEO Tony James, are too adept to label these required savings accounts as a stealth replacement for Social Security.The plan, as described in Sirota’s article parallels the way the contributions are made now to Social Security, with both employers and employees required to put aside a percentage of payroll…but not in the form of Social Security taxes, but in individual retirement accounts that in turn are put in “pooled plans run by professional managers”.
If you look at James’ speech, what he is proposing sounds innocuous, a supposed additional 3% of worker savings. But that is a nearly 25% increase over what workers are paying into Social Security now. Moreover, most experts agree that to the extent that Social Security needs fixing (30 forecasts are fraught), some not very onerous tweaks would do the trick. First and foremost would be to eliminate the payroll tax ceiling.