"Private" pay

A lesser known battle in the Social Security debate, this one amongst those who think private accounts are good - How much do we penalize people who choose the private accounts?:

A less-noticed element in most major Social Security proposals, including all three recommended by Bush's study commission in 2001, would impose another reduction for those who choose investment accounts. Retirees would not be allowed to receive both their full Social Security benefit and the entire proceeds of their private accounts.

Instead, at retirement, guaranteed benefits for workers with investment accounts would be reduced based on the amount of taxes used to set up the private accounts. The deduction would be made regardless of how a retiree's investments had fared.

Rep. Steny Hoyer of Maryland, the House Democratic whip, says the reduction and other elements of private-account proposals will present problems for Bush once Americans look at the details. "The reality is there are substantial costs and substantial trade-offs," he says.

Most proposals also would require that workers with private accounts use those assets to buy an annuity when they retire. The amount remaining in the investment account, if any, could be passed on to heirs.

The benefit reduction based on contributions to private accounts has rarely been mentioned by Bush and other advocates of private accounts. But it is well known to Social Security experts such as David John, a leading advocate of private accounts at the conservative Heritage Foundation, and Sen. Lindsey Graham, R-S.C., author of the most prominent proposal in Congress.

Under a plan proposed by the 2001 commission, a medium earner would lose about 23% of his or her regular benefit, according to calculations by Social Security's chief actuary, Stephen Goss.

Some proposals take a bigger and more direct bite. Under a proposal by Rep. Clay Shaw, R-Fla., 95% of the accumulated balance in each worker's private account would be transferred at retirement to the Social Security Trust Fund, where it would fund traditional benefits. The retiree would keep only 5% of his account.

I must say these proposals get worse and worse the more you learn. Losing money because you went to a private account that was specifically designed to make you more money?

If the government wants a chunk of the "private investments," why not just allow the government to do the investing themselves?