Why? "Follow the money."

Kevin Drum wonders why Bush et al are pushing Social Security privatization.

Maybe a head fake of some kind?...This time, though? What's the point of loudly pushing a proposal you're going to lose? What's behind it all?

Yes, a head fake is a good way to put it. Here's my theory:

1. They know they will lose on individual "private accounts."
2. But there is still the now-undiscussed issue of where/how the Social Security Trust Fund (i.e. the huge surplus we've been building up for the past 15 or so years) can be invested. Right now it is only, I believe, in Treasuries.
3. They think the political compromise will be to allow some portion of the Social Security Trust Fund to be invested in broad market Indexes.
4. (And that may not be a bad idea, actually.)
5. Such an investment in broad market Indexes acts as a floor on stock prices...kind of a "price support" for equities.
6. What better way to protect a Dow 11,000 than to have a vast flood of new money come in to the market?
7. At least that's one theory.

•••

Nathan Newman also has a theory. So does MaxSpeak, as does The Decembrist.

But most folks seem to miss the big "head fake" i.e. that the issue is not whether the SS Trust Fund gets divided up into millions of little accounts ("dsaggregation") but whether the Fund in any form can be invested in stocks & corporate bonds. That's the issue which we are all missing.

And I think that's the gracious fall-back position for Bush when he loses on "private accounts," which I believe on reflection is a throwaway proposition. The real prize is to use the SS Trust Fund to buy into various market Indexes and thus, by the sheer weight of dollars, provide a "floor" under the market. (And btw, I am not saying that investing some small portion of the Trust Fund in the broad market is a bad idea; in fact it might be a very reasonable idea. But my guess is that's where we'll end up on this issue. It's just too bad Bush is so devious about getting to it.)

Steve Gilliard has a similar perception (as to the impact on the stock market) but thinks it's a Plot to steal your future.