Yesterday, during a debate with former Governor Jeanne Shaheen (D-NH), Sen. John Sununu (R-NH) “defended his plan for private Social Security accounts,” saying “the fact of the matter is the word privatization usually is used to scare people.” He added “I don’t believe it’s privatization if you give the youngest workers the option of saving some of their Social Security tax in an account.”
However, having workers place money into a private account – which is what Sununu proposes – absolutely amounts to privatization. And Sununu has repeatedly advocated for private Social Security accounts despite the recent fluctuations in the stock market, which would have wreaked havoc on such accounts.
In fact, earlier this month Sununu was asked if the issue of private accounts is “dead, given how scary the stock market has been?” He replied that “it shouldn’t be“:
Moderator: What do those troubles, Senator Sununu, do for the enthusiasm of an initiative that you’ve long championed, and that’s the partial voluntary privatization of social security. Is this issue now, dead, given how scary the stock market has been?
Sununu: It shouldn’t be. … And I think, allowing workers, the option of taking some of their social security taxes and putting them into an IRA or 401K plan, with oversight, with regulation, in the long term, is better for them.
However, it’s hard to argue that having money in a private account would be “better.” As an analysis by the Center on American Progress Action Fund shows, a retiree with a private Social Security account invested in stocks “would have lost approximately $26,000 if they had retired on October 1, 2008 after 35 years of contributions to such an account.”
“We should not be throwing our hard-earned Social Security benefits onto the roulette wheel of the stock market,” said John Mendolusky, president of the New Hampshire Alliance for Retired Americans. “Wall Street firms would collect the service fees and reap large windfall profits off these private accounts, while seniors in New Hampshire and across the country would take on huge risk in these already uncertain times.”
As if the effect on individual seniors wasn’t bad enough, the Center for Budget and Policy Priorities (CBPP) concluded that privatizing social security accounts would also increase the national debt “every year for at least the next 75 years.” The CBPP also noted that “increased deficits and debt would be avoided only if Congress made very deep cuts in other programs and/or if corporate income tax receipts boomed in an unprecedented manner that is extremely unlikely to occur.”