Wampum

Legacy

As the inauguration approaches, one’s thoughts turn to President Bush’s legacy. If he succeeds in pushing through private accounts for Social Security, his domestic legacy might overshadow foreign policy.

The Guardian’s Sid Blumenthal asks former Treasury Secretary, former head of Goldman Sachs, and current director of Citigroup, Robert Rubin about the President's coming proposals for Social Security:

"It's a badly, badly flawed plan," Robert Rubin, the former secretary of the treasury and current Citigroup director, told me. "From a fiscal point of view it's horrendous. It adds to deficits and federal debt in very large numbers until 2060." He calculates that the transition costs of Bush's plan for the first 10 years will be at least $2 trillion, and $4.5 trillion for the second 10 years.

The exploding deficit would have an "adverse effect on interest rates, an adverse effect on consumption and housing prices, reduce productivity and growth, and crowd out debt capital to the private sector. Markets could begin to lose confidence in fiscal policy. The soundness of social security will be worse".

Rubin adds that the stock market is hardly a sure bet. "You are not making social security more secure by subjecting people's retirement to equity risk. If you look at the Nikkei in Japan you get a sense of what can happen."

If we add rising interest rates, reduced consumption, lower economic growth, lower productivity growth, higher prices, decreased retirement security, and loss of confidence to a first term record of zero job growth, mounting national debt, and rising income inequality we have a domestic legacy that could last for ages.

The Guardian quotes the White House memo by Peter Wehner as writing that the President’s Social Security proposals can “help transform the political and philosophical landscape of the country."

That is right. After all, one legacy of Herbert Hoover was that Democrats ran against him for fifty years.

Posted by Dwight Meredith at January 20, 2005 08:53 AM | TrackBack