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The Roadmap to Privitization

It appears the GOP Budget philosophy is…if at first you don’t succeed with a failed idea try, try again (and again, and again.) This week the ranking Republican on the House Budget Committee, Paul Ryan, reintroduced his “Roadmap for America’s Future”.

In short, it is a budget plan which decimates Social Security and Medicare in the name of deficit reduction. The only thing new about this strategy, is the fact that Rep. Ryan isn’t shy about acknowledging that he believes seniors should foot the bill for our current economic nightmare.

Ezra Klein described the plan this way:

To move us to surpluses, Ryan’s budget proposes reforms that are nothing short of violent. Medicare is privatized. Seniors get a voucher to buy private insurance, and the voucher’s growth is far slower than the expected growth of health-care costs. Medicaid is also privatized. The employer tax exclusion is fully eliminated, replaced by a tax credit that grows more slowly than medical costs. And beyond health care, Social Security gets guaranteed, private accounts that CBO says will actually cost more than the present arrangement, further underscoring how ancillary the program is to our budget problem.

Let’s see, seniors have to find private insurers who will accept their vouchers which will by definition cover less and less of what health care actually costs. In other words, let’s ignore any effort to reign in the skyrocketing costs of health care nationwide in favor of shifting all of those skyrocketing costs directly to seniors. This is a roadmap for disaster.

The CBO said this about the Ryan plan:

Both the level of expected federal spending on Medicare and the uncertainty surrounding that spending would decline, but enrollees’ spending for health care and the uncertainty surrounding that spending would increase.

Under the Roadmap, the value of the voucher would be less than expected Medicare spending per enrollee in 2021, when the voucher program would begin. In addition, Medicare’s current payment rates for providers are lower than those paid by commercial insurers, and the program’s administrative costs are lower than those for individually purchased insurance. Beneficiaries would therefore face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.

Moreover, the value of the voucher would grow significantly more slowly than CBO expects that Medicare spending per enrollee would grow under current law. Beneficiaries would therefore be likely to purchase less comprehensive health plans or plans more heavily managed than traditional Medicare, resulting in some combination of less use of health care services and less use of technologically advanced treatments than under current law. Beneficiaries would also bear the financial risk for the cost of buying insurance policies or the cost of obtaining health care services beyond what would be covered by their insurance.

As for Social Security, the GOP Roadmap leads to the same privatization dead-end for seniors, who are already reeling from Wall Street excesses and collapse which have decimated their nest-eggs. Once again, just as we saw in President Bush’s failed privatization plan, long-term solvency isn’t the goal. The goal is to turn Social Security over to Wall Street through the creation of Social Security private accounts.

Texas Rep. Jeb Hensarling describes it as a little “re-engineering” of the social contract.
That “re-engineering” would put your Social Security in the hands of the same Wall Street money managers the federal government just bailed out. What would your Social Security look like now, if we had privatized the system two years ago? Here’s what CAP reported back in 2008, before the worst of the economic collapse…

As a Center for American Progress Action Fund report found, under a Bush-style privatization plan, a October 2008 retiree would have lost $26,000 in the market plunge. If the U.S. stock market had behaved like the Japanese market during the duration of that retiree’s work life, “a private account would have experienced sharp negative returns, losing $70,000 — an effective -3.3 percent net annual rate of return.” And this doesn’t take into account the full plunge of the stock market, which dipped below 7,000 in March 2009.

As the Cunning Realist pointed out, failed investment banks Bear Stearns and Lehman Brothers were both “blue chips, the sort of companies that proponents of private accounts insisted any new system would be limited to.” Can you imagine the mess that would have occurred — and the leverage those companies would have held — had not only the financial system’s health, but the retirement accounts of untold seniors, been tied up in them?

The Center for Economic and Policy Research found that, “as a result of the collapse of the housing bubble, the vast majority of baby boomers will be approaching retirement with little wealth outside of Social Security.” Privatization opponents would have had seniors sacrifice that safety net as well.

Destroying Social Security and Medicare, under the guise of deficit reduction, isn’t about creating sound economic policy it’s just more of the same old privatization politics, rewrapped, repackaged and rejected by the American people just two years ago.

Are our collective memories really so short? Because the truth is…this roadmap puts America’s seniors on a highway to hell.
Source: National Committee to Preserve Social Security and Medicare

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