Warning: this is not politically neutral.

Among the drivel Bush was spouting in the campaign-- ( and either ignored or swallowed by the gullible 51%)--- was his wonderful idea of Personal Savings Accounts. You could take some of your Social Security taxes and invest it. Of course this would cost the Social Security system up to 1 trillion for transition costs ( including money taken out of the system).

The idea behind the program is that ordinary people could make more money in the market than Social Security would pay them, and having partly opted out, their Social Security benefits would be scaled back.

However, like most of Bush's crackpot ideas, it turns out that this system will benefit primarily his well-heeled supporters--- (but not Middle America)----in this case the Wall Street brokers who would market it. (I've heard Bush's "Ownership Society" described as the "You're On Your Own" Society.

It may well have appeal--Americans love to think of themselves as "rugged individualists".

The plan is that ordinary investors, happy to have charge of some of their own money, rather than having it doled out by the nanny state, would put money in the market, secure in the knowledge that "historically" stocks have returned 10.4% annually since 1925 (S & P).

However, the Wall St. Journal (27 Oct 2004, page D-1) points out:

1) Part of this came from generous dividend yields.
2) Another element was rising price-earnings (P/E) ratios.

Now, says the Journal, dividend yields are low, and P/E ratios are already high, and unlikely to expand substantially. Even with a booming economy (not exactly guaranteed), investors will be lucky to even approach these returns.

Furthermore, with baby boomers starting to retire in large numbers, starting in about 6
years, they will be cashing in stocks, not buying---markets will reflect this (this last is my own observation, not in the column).

The Journal columnist says: "I fear that the privatization of Social Security will be a disaster unless it is accompanied by a slew of safeguards".

Pardon my skepticism that safeguards figure prominently in Bush's plan.

For Doug R,, Larry K, and other Bushites of either the "I'm All Right, Jack" or the clueless brigade, it may not make a difference---but for most Social Security recipients it's a serious mistake.

Says the Journal columnist: "Brokerage firms could refuse to sell bad investment products and ruthlessly weed out rotten brokers. Instead they appear content to let their brokers loose on the unsuspecting public. What about the legal problems that inevitably follow? That, it seems, is viewed as simply the price of doing business"


Welcome to Mr. Bush's "Ownership Society".