US President George W. Bush's plan to radically reform and part privatise the social security retirement system would benefit women and ethnic minorities, according to the Cato Institute.
Michael Tanner, director of the Cato Institute Project on Social Security Privatisation, said that African-Americans would stand to gain the most from the privatisation of the Social Security system as it would allow them the chance to accumulate real wealth. Tanner believes that they, and other low-income workers, are unable to do so at the moment as social security taxes other forms of savings and investments.
According to Tanner, the current system is inadequate at providing for the retirement needs of elderly African-Americans, despite their being more likely to be dependant on the system. Tanner added that as African-Americans generally have shorter life expectancies than whites do, the current social security system cheats them as they receive less total payments over the course of their lifetimes.
Regarding women, the Cato Institute believes that the current system heavily penalises working women, as well as divorced or never married women. Under the dual entitlement rule, working women who pay Social Security taxes, receive no more benefits than those who do not work and instead rely solely on their husband's spousal benefits.
According to the Institute, women's social security contributions earn them nothing, and the fact that women who divorce after less than 10 years of marriage receive no spousal benefit at all merely highlights the system's failings.
Tanner's comments come as criticism towards President Bush's plan to reform Social Security becomes increasingly hostile. If Bush's plan to part privatise social security is implemented, it could create a windfall for asset managers as American workers would be allowed to divert a portion of their income, normally devoted to social security taxes, into a private investment account.
US Senator Jon Corzine, the former co-chairman of Goldman Sachs, has labelled Bush's plan as a bad idea that would undermine, and possibly destroy, the social security system. William Novelli, executive director of the American Association of Retired Persons (AARP), declared that privatisation would only worsen the system’s ability to pay retirees and advance the date of insolvency.
Despite the vocal criticisms, the bipartisan commission appointed by Bush to look at Social Security reform has warned that without reform, the system will be bankrupt by 2016. The commission's chairmen, Daniel Moynihan and Richard Parsons said that in that event, the US government would be forced to take one of three options: raise taxes, cut benefit levels or borrow heavily.
Founded in 1977, the Cato Institute is an independent, non-partisan public policy research foundation. Based in Washington, DC, the Institute is named for Cato's Letters, the libertarian pamphlets that helped lay the philosophical foundation for the American Revolution.
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