For 64 years, Social Security has been funded by payroll taxes of 12.4 percent and invested in government bonds. Today, Social Security provides benefits to approximately 44 million Americans, including retired and disabled workers, their spouses and dependents. But, the system, according to many economists and politicians, is now in jeopardy.

Last Monday in a speech at Rancho Cucamonga, California, presidential candidate George W. Bush unveiled a plan for partial privatization of Social Security that would allow Americans to invest their Social Security retirement funds on their own. While retaining a safety net of funds, individuals would be allowed to put portions of their payroll taxes in approved funds that invest in stocks and bonds. The details of how much of those funds could be set aside for private investment in Bush's plan were unclear.

"There is a fundamental difference between my opponent and me," George Bush explained, "[Gore] trusts only government to manage our retirement. I trust Americans to make their own decisions and manage their own money."

While privatization of Social Security is largely supported by Republicans, this issue has created strange political bedfellows: Rep. Patrick Moynihan, D-N.Y., and John Kerry, D-Mass., advocate a more limited form of privatization that would allow employees to voluntarily put two percent of their take-home pay into personal savings accounts.

Vice President Al Gore, on the other hand, is adamantly opposed to any privatization of Social Security. The system, he says, can be made solvent using savings from the existing budget surplus. He criticizes privatization as too radical - exposing retirees to unnecessary economic risk - and maintains that the healthy economy makes privatization unnecessary.

As the baby-boomers move closer to retirement, Americans are still divided over whether Social Security should be privatized. A New York Times-CBS poll showed that more than half of 18 to 44-year olds want to privately invest some of their Social Security, while most adults over 45 prefer to stick with the current system.

On One Hand...

For decades, big government has been taking taxes from Americans and putting them into the Social Security system on the premise that retirement funds are too important to be left to individuals. Now individual Americans are paying the price. When the baby-boom generation begins retiring in 2013, the Social Security system will likely go bankrupt. We may never get all the money back that we put into it. Privatization will give Americans direct control over their retirement funds and could most likely generate a far greater yield on investment than the current Social Security system. The safety net should remain, but offering younger people the chance to build on their personal accounts gives them the chance to create the retirement and security for their children they deserve.

On the Other Hand...

Bush's Social Security privatization plan is a little like Nixon's secret plan for peace in Vietnam. It's indefinite, risky and contains several glitches. Management fees could eat up about 20 percent of a five percent return on investment, while annuities - the preferred investment for new retirees - would cost 20 percent of that capital. If the stock market takes an unforeseen dive, employees may find their retirement savings cut dramatically. Furthermore, the current system is doing pretty well. Last year, Social Security made almost $106 billion in profits. After 2020, the Trust Fund will contain more than $1 trillion. If the Fund starts drying up - after 2034 - there will be enough in taxes to pay back at least 75 percent of benefits. Besides, the Social Security "crisis" is largely based on pessimistic assumptions about economic growth. If the economy continues to grow at current rates, there will be no crisis.

• George W. Bush's proposal does not specify the portion of the payroll tax that would be set aside for private investment. "A young worker can take some portion of his or her payroll tax and put it in a fund that invests in stocks and bonds. We will establish basic standards of safety and soundness, so that investments are only in steady, reliable funds."
• Social Security trust funds, which are invested in U.S. Treasury bonds, will continue to grow until the year 2018, when they will total $2.87 trillion. After that point, funds will decline as baby-boomers begin to enter the program. By 2030, if the government makes no adjustments, the trust funds will be depleted, and Social Security benefits will come directly out of taxes.
• Maintenance charges - the adminstrative charges of maintaining a small, private account, would be greater for small investors than the current administrative overhead. According to Dean Baker of the Economic Policy Institute, someone with $500 invested may spend about $30 a year on maintenance charges.

George W. Bush, Mother Jones, Economic Policy Institute