I’ve been saving up my thoughts on Social Security for an upcoming Satire Friday, but the real news on Social Security has become urgent enough that I’ve decided to tackle it in a regular, non-satirical post.

I should say at the outset (as I’ve said before) that I don’t like Social Security, mostly because of its regressive funding method, the payroll tax. Why should the poorest Americans pay the largest portion of the tax? I do like the fact that every American has a safety net when he or she reaches retirement age; I don’t like the fact that it costs as much as it does.

But this post isn’t about that, it’s about Max Sawicky’s latest post about Social Security. In it, Sawicky imagines the retirement situation of an imaginary child, “Little Nell,” born in 2000. Under the current plan, she’d be entitled to $26,400 a year at retirement (though with the projected Social Security shortfall, only $19,900 of it is currently slated to be funded). What would she get under the Bush plan? Let Max tell you:

When you include the returns to the individual accounts and “price indexing” of benefits, Little Nell’s benefit is . . . $14,600. SHE DOES WORSE THAN UNDER THE “BANKRUPT” TRUST FUND! Way worse! Can you hear me now? She even does worse than a current retiree.

Read the whole thing.

Now, obviously Max is picking and choosing his examples to give the most dramatic effect. With private accounts, some will do better than that. I suspect that many will do better than under the current plan. This isn’t really the point. The point is, millions and millions of workers will do much worse under the Bush plan than they would even if we didn’t change the payroll tax at all. This isn’t even considering what might happen to the millions of people who will inevitably mismanage their private accounts. Many conservative investors, making rational decisions about their investments, won’t do as well as they would under the current system.

Why?

Because the hidden “feature” of private Social Security accounts is that poorer people get less money to put in their accounts. If I make $80,000 a year, I get to invest 4 percent of that in a private account: $3,200 a year. If I only make $30,000 a year, I only get to invest $1,200. If my family is right at the poverty line, I get under $600 a year to invest. Even the “miracle” of compound interest won’t turn $600 a year into enough money to retire on.

Guess what? The most regressive tax in America just got more regressive, and it’s not only a regressive tax, its benefits are also regressive: The rich both pay less into Social Security under the Bush plan and get more out of it. I don’t like Social Security because it is a regressive tax, and I don’t like the Bush plan because it’s even more regressive than that.

UPDATE: According to today’s Charlotte Observer, the private portion of the account will be capped at around $1300/year. This means *everyone* will have a hard time doing better than the current plan, considering guaranteed benefits will simultaneously be reduced nearly by half. Very interesting… reduce benefits, but keep the current regressive funding structure. This plan is looking worse and worse.