As is the case with most of Bush's great ideas, the individual retirement accounts he proposes would be one more handout to big business -- but the upshot is, this one could do in big business, and the rest of us with it.
As Paul Krugman points out, in its most basic, what the program would do is have the government borrow money and invest it in the stock market. As younger workers start paying money into their individual accounts, the government has to borrow to make up for that lost income to pay the benefits to current retirees. That in and of itself is an indirect way for the government to invest in the stock market.
But as these individual accounts begin to produce (assuming they would), then the government could cut benefits, since the private accounts were making more money. That's another way the government could hand money to the private sector indirectly.
Now, will these accounts work? I believe the wild card here is just what effect all this money flowing into the system would have. Krugman also pointed out that individuals investing their accounts in Treasury bonds would do the government no good, as the earnings from T-bills comes from interest paid by the government, negating any savings.
So all that money would need to go into the stock market, but how would the market react to that inflow of cash? I'm no financial expert, but it would have to have an effect. And of course, the long-term effect of all this investing and borrowing is that if the bottom fell out --- well, the bottom wouldreally fall out.
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