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A Halloween mask for Social Security

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Last week, President Bush promised to step, once again, onto the "third rail of politics" by renewing his call to partly privatize the Social Security system.

Unless voters surprise pollsters by giving Republicans a clear victory in next week's congressional elections, his chances of success are slim.

"It depends on whether Bush retains control of both houses of Congress," says Stephen Spear, an economist at Carnegie Mellon University's business school in Pittsburgh. He figures that trimming Social Security is so unpopular that Mr. Bush will "run into the same [political] firestorm" he did in 2005, when he proposed letting Americans put a portion of their payroll taxes into individual savings accounts that might, or might not, provide a better return than Social Security.

Interviewed last week on CNBC, Bush said he wanted to assure people that their payroll taxes aren't going into a "bankrupt" system. "I want to deal with the unfunded liabilities inherent in Social Security and Medicare," he added.

Curiously, a little-known government body, the Federal Accounting Standards Advisory Board, on that same day put out for public discussion a proposal that might, a year from now, magnify those unfunded liabilities by hundreds of billions of dollars. If the FASAB eventually approves such a change in the accounting of federal social insurance programs and the government goes along, it would not change the financial realities of either Social Security or Medicare. Nor would it affect the regular federal budget, with its cash reckoning of revenue, expenditure, and – nowadays, anyway – large deficits.

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