Greenspan takes stand;
will Congress be moved?

Greenspan also offered a cautious but unequivocal endorsement of personal accounts, even though he acknowledged that such accounts do not inherently do anything to solve the financing gap or increase what he described as an alarmingly low national savings rate.

Like many conservatives, Greenspan offered reasoning that was perhaps more philosophical than economic.

“These accounts, properly constructed and managed, will create … a sense of increased wealth on the part of the middle- and lower-income classes of this society, who have had to struggle with very little capital,” he told House members Thursday. “And while they do have a claim against Social Security system in the future, as best as I can judge, they don't feel as though it's personal wealth they way they would with personal accounts.”

Critics of President Bush’s plan contend personal accounts will do nothing to help national savings and could harm it.

“The president’s plan does nothing to raise national savings,” said Jason Furman, a senior fellow at the Center on Budget and Policy Priorities and former Kerry campaign adviser. “It is at best a wash. I worry that people will see they have $100,000 in their account and think they don’t have to save as much.”

Furman has developed a spreadsheet to calculate potential Social Security benefits based on the limited details that have been disclosed about the program favored by President Bush. The results, published this week in The Wall Street Journal, are eye-opening.

Take a worker born in 1990 who earns a higher-than-average $58,400 in today’s dollars for his entire career and sets aside the maximum 4 percent in a personal account. He would qualify for a guaranteed benefit of only $2,191 a year at retirement, with the rest coming from his personal account, according to the article by WSJ deputy bureau chief David Wessel.

If his stock and bond investments earned an average of 3 percent a year plus inflation, the worker could convert the fund into an annuity that would bring his total retirement income to $18,406 a year. The account would have to earn a steady 4.6 percent a year over inflation to bring his annual benefit up to $28,863. That is the amount guaranteed under current law, which is unaffordable given current tax rates and economic projections.

With President Bush still barnstorming the country trying to convince Americans that Social Security is headed over a cliff, the administration said any such calculations are “premature.”

“We’re all debating a plan that hasn’t been specified,” said Dudley.

That is another reason Greenspan’s comments are unlikely to carry anywhere near the weight they did four years ago.

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