Just when you thought the unpopular private accounts debacle was through, out comes another "plan." Here we go again. This time, it's a real howler -- South Carolina's Jim DeMint has put forward a bill, S.1302, that would take the Social Security surplus out of the trust fund and put it into a new "personal account" bureaucracy. Republicans such as Paul Ryan of Wisconsin are cooking up the same hokum in the House.

Senator DeMint is most famous for his peculiar stance that gays should be barred from teaching in school, but like an eager freshman, he has volunteered himself for this ridiculous, doomed mission to accomplish a political end. As the Washington Post reports, the bill amounts not so much to a sincere if idiotic try at a solution as an attempt to yet again paint Democrats as "obstructionist," merely for opposing what any sane legislator (including, I predict most Republicans) would oppose. As DeMint put it, "If the Republicans take this to a vote and the Democrats try to stop us, I think we end up the winners. It'll help convince Americans in 2006 that we need a few more Republicans."

The proposal does little to address Social Security's looming insolvency. Nor is it all that individual account supporters would like to see.... But the bill does reach across the ideological divide in a way that should be hard for honest Democrats to resist. (Michael Tanner of the pro-privatization Cato Institute, "Social Security option," Washington Times, 6/23/05)

And that's what the bill's advocate writes. Actually, the bill does nothing to benefit Social Security's finances, and in fact might harm the system by monkeying around with its assets and driving up the public debt. But Republicans insist this is some kind of reach across the middle. That is an absurd claim, but I guess if they keep repeating it, it might catch on.

Let's set the record straight now about this scheme.

As readers of PoliAnna are aware, Social Security -- unlike the rest of the federal government -- runs a large surplus. This surplus was concocted back in 1983 by the Greenspan Commission in order to save up enough extra money (i.e., "prefund" it) to ride out the retirement years of the baby boom generation, when the system will be strained.

S.1302, adorably dubbed the "Stop the Raid on Social Security Act of 2005," does the exact opposite of what you might expect, were you not familiar with the Orwellian tactics of the modern right. Instead of protecting the systems financing, the bill robs the surplus to install these private accounts. Right now, the trust fund saves its money in Treasury bonds. Mocking these Constitution-backed bonds, DeMint's proposal discards the notion of saving and passes the money over to a new bureaucracy, which will divvy up tiny portions among the people and invest these "personal accounts" in -- drum roll -- Treasury bonds. (Later, of course, good citizens would be able to choose from a couple other government-run stock market funds.)

So far, sounds kind of harmless -- but remember, the Social Security trust fund has a purpose. We need the money for our coming lean years, when the baby boomers retire. So, what happens in twenty-odd years, when that money isn't there anymore because it has gone into these "personal accounts"?

Whenever the Secretary of the Treasury makes a transfer under paragraph (1) [i.e., from the surplus to the new bureaucracy], the Secretary of the Treasury also shall transfer, to the extent necessary, from amounts otherwise available in the general fund of the Treasury, such amounts as are necessary to maintain a 100 percent ratio of assets of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund to the annual amount required to pay the full amount of benefits payable under part A for each year occurring during the period that begins with the year in which such transfer is made and ends with 2041. (S.1302, Sec. 101)

In plain English, that means, according to this bill, the money raided from the trust fund will supposedly be repaid right out of the general fund -- i.e., we're going to borrow it. According to the Social Security actuaries, such a sleight of hand will cost us $1 trillion in new debt.

Shorter DeMint: let's borrow $1 trillion to "give" to people (the same people who will have to repay that debt, eventually) some relatively tiny "personal retirement accounts." Meanwhile, let's create a costly new bureaucracy to manage the accounts and preselect which private companies will benefit from the collectivized stock trading. And while we're at it, of course, each worker's traditional guaranteed Social Security benefits will have to be cut by some unpredictable clawback.

Two more idiotic details: money will only go into the "personal accounts" as long as there remains a Social Security surplus to pilfer -- which, according to these crisis-mongers, is about ten years. After that, these tiny accounts will just hang out for a while, along with the giant bureaucracy needed to manage them. Unless, of course, future Congresses decide to extend them by borrowing yet more money. You can call this the foot-in-the-door approach.

Second, while DeMint talks a big game about "fiscal discipline," he hasn't actually explained how to get the monkey off his back. While the general budget borrows a couple hundred billion each year from the Social Security trust fund, which will be repaid in the lean years by borrowing from the public (i.e., moving debt from "intragovernmental" to "publicly-held"), DeMint's plan simply makes us borrow from the public today, a time when we are perhaps at our worst possible moment for foreign borrowing.

MYTH: DeMint's surplus raid amounts to a free lunch

Democrats have said that persona accounts take money out of Social Security. Mr. DeMint's proposal would only use Social security surpluses. The government's general operating budget would be deprived of those funds, but Social Security's finances would not be touched. There is no "transition cost."[1] Democrats have said personal accounts are too risky. Mr. DeMint's proposal would let workers invest only in government bonds. All that would change is who holds the bonds. Instead of the Social Security Trust Fund keeping the bonds, individual workers would hold them. Workers would gain some of the benefits of ownership and inheritability without assuming any market risk. [2]

Democrats have said Social Security surpluses should not be used to fund non-Social Security spending. Mr. DeMint's proposal would represent a true "lock box," devoting that money solely to the worker's retirement. [3] Without Social Security surpluses to hide behind, Congress would have to face up to the choices of running higher deficits, raising taxes or, hopefully, spending less. [4] (Tanner)

REALITY

A quick recap of the spin:

(1) The "transition cost" is really the cost of the accounts themselves, about $1 trillion. As quoted above, Sec. 101 of the bill explicitly states that the money lifted from the trust fund will be replaced from the general fund in the future. Since these accounts are temporary (ha!), and they come with that repayment clause, they supposedly don't reduce the eventually funding of Social Security. Which means we just spent an extra trillion after moving some money around.

(2) While the "personal accounts" will initially be in Treasury bonds, that won't last for too long. From DeMint's press release: "In January 2008, the board can offer individuals the opportunity to diversity into other prudent investment options." As for "the benefits of ownership," those come with corresponding cuts in the benefits of, well, traditional benefits. Whether that's a win or a loss is up to the new stock-selecting bureaucracy.

(3) On the contrary, these accounts are nothing like a "lock box" -- instead, they amount to a separate program. The Social Security system itself, on the other hand, will lose its "full faith and credit" Treasury bonds, instead getting a vague promise (that Sec. 101) that the general fund will take care of it, somehow.

(4) This is the real howler. When was the last time Congress made any tough choices to balance the budget? Oh yeah -- that was when a Democrat was the president. Realistically, they will continue to run up the same general fund deficit, while the so-called "unified" deficit (of cash flow, including the separate Social Security revenue) will be jacked up another trillion for these new "personal accounts."

In short, DeMint's new bill is nothing but an unpassable, trillion-dollar fiasco of smoke and mirrors designed to play into a partisan attack against Democrats. Far from being any kind of potentially bipartisan olive branch, this ridiculous bill is a hamhandedly-crafted trap.