Tuesday, November 09, 2004

How about this for an angle in the coming propaganda wars over the Shrub's plans for partial privatization of Social Security: "Private accounts -- another Bush big government program"?
The bonanza many believe President Bush has handed the mutual fund industry with his plans to reform Social Security may be a mirage, industry leaders say.

How workers will be allowed to invest some of their payroll taxes in the stock market is far from clear, but there is a presumption it will be windfall for an industry that manages the nest eggs of about 95 million Americans.

The administrative costs for managing accounts that for the most part will hold less than $1,000 in the first year suggests mutual fund companies could easily lose money for at least several years, industry experts said. . . .

Because of the small size of most accounts, it will probably take five years to get the system off the ground and be a size that is reasonable for the private sector, he said.

The Investment Company Institute, the main lobby for the mutual fund industry, has said the transition to personal retirement accounts will require government-sponsored funds.
Of course, there are (at least) two ways to read this story. The first is that the mutual fund industry really thinks the government will have to manage all new private Social Security accounts for many years before they are at all profitable. Thus not only will the federal government (and thus eventually we taxpayers) have to eat a shit sandwich on the transition costs from the current system to private accounts, but it will also have to eat shit h'ors d'oeuvres for years in the form of management costs.

The second is that the mutual fund industry is giving ample warning to the Bush administration that it is going to demand some rather attractive fees to manage his pet private Social Security accounts when the wrangling begins in Congress next year. On past experience with Bush's Medicare bill, there is no reason to believe he won't give industry the keys to the candy store on this one as well.

Then guess who's eating the shit sandwich?


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