On the Wall Street Journal editorial page (subs. req), Arthur Levitt Jr. tolls the bell for Bush's Social Security plan, saying of "private savings accounts":
Every dollar you take out of traditional Social Security and put into a PSA must be paid back out of your Social Security benefit -- plus interest. If this sounds a lot like margin investing, it should not be a surprise since the PSA plan is modeled on that concept: A worker investing in a PSA would hope -- like a margin investor -- that assets accrued were greater than debts...To come out ahead, then, an investor would have to earn a rate of return that exceeds the interest of the loan, plus expenses.
Could one make this return within an acceptable degree of risk? According to a study by Robert Shiller of Yale, the answer is: not that often...
Borrowing against one's Social Security to invest in the markets is a risky strategy that would only make sense for certain high net-worth investors who can afford to lose their entire investment.
Levitt credits Bush with putting reform on the table. So do I. But this plan is not the way to fix Social Security, and it's time to retire it.