Bush fails in his marketing efforts

"You can fool some people (red states) all the time. You can fool some people (blue states) some time. But you can't fool all the people (all Americans) all the time." That is exactly what has happened with the marketing of Social Security privatization to American people. While Americans may not like to save or may not be the best prepared for retirement, but when it comes to being deprived of their hard-earned money, they can see right through it. (Related article: Americans prefer retirement security over wealth)

So President Bush has finally admitted defeat that he could not sell his idea so far either to American people or even to Congress. "I agree, you can't cram an issue down people's throats. As a matter of fact, the best way to get this issue addressed in the halls of Congress is for the American people to say, why don't we come together and do something. And so the first priority of mine is to convince the people we have a problem," President Bush admitted, recognizing that despite spending millions of dollars of taxpayers' money and traveling all over, vast majority of Americans are not buying into his plan that helps no one but his friends in the financial services industry. (Related article: Support slips for President's ideas on personal retirement accounts)

Even Federal Reserve Bank Chairman Alan Greenspan has offered support only in principle and that is exactly where most Americans stand. Private retirement accounts (PRA) are, in principle, and excellent idea. And so is an "ownership society." But how to get there? Both Greenspan and American people are saying that if these two ideas mean that Social Security problems will not be solved, retirement benefits will actually go down, and we may need to borrow trillions of dollars, then we need to slow down and think how we can do it better. (Related article: Greenspan does not support president's current proposal)

During his press conference, the President basically admitted that even the United States Congress does not believe that there is a crisis situation with the Social Security. Alan Greenspan was even more eloquent in disagreeing with the president. "Crisis to me usually refers to something which is going to happen tomorrow or is on the edge of going into a very serious change," he said. "That is not going to happen (in the case of Social Security)."

"Let me repeat what I said before -- and I fully understand this -- that this idea is going nowhere if the Congress does not believe there is a problem. Why should somebody take the hard path if they don't believe there's a problem? And so I'm going to spend a lot of time reminding people there is a problem," the president said in answer to a question, apparently frustrated that he is the only one who sees things this way. He had expected that Americans and members of Congress will believe his made-up story about the crisis as they did his made-up stories about WMD. (Related article: Imaginary WMD and the Social Security crisis)

Greenspan said that private retirement accounts funded with a portion of the Social Security payroll tax will not address the program's solvency issue, as initially argued by the supporters of privatization. While private accounts are going to help many Americans become part of an ownership society, Greenspan repeated that higher government borrowing to finance the move to private accounts poses a risk of higher deficits and interest rates. (Related article: Transition costs of privatization to hurt US economy)

President Bush has floated the idea of borrowing to make up for money lost to private accounts. Those funds would eventually be paid back by cutting Social Security benefits in the future. The idea is that Americans would eventually get enough of a benefit from the private accounts to make up for the loss of guaranteed payments from Social Security. This is a point of disagreement among Americans who are concerned that market volatility may wipe out their retirement savings. (Related article: Not all Americans ready for the stock market)

In his testimony, Greenspan emphasized the risks of a strategy that is based on borrowing to build an ownership society. Making the transition to private accounts could require borrowing $2 trillion or more, according to some estimates. It is not clear, either, that future benefit cuts can produce enough savings to pay off that debt. Plus, it is also obvious that current deficit reduction measures are not working either.

Greenspan said it is possible that financial markets may react to the government taking on all this debt by raising interest rates, and that could in turn harm the US economy. He warned lawmakers to go slow on any transition to private retirement accounts, as envisioned by the president.

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