A Social Security Administration (SSA) memo states that a conversion of the Social Security program to a new, voluntary system of personal retirement accounts would allow Social Security “to be solvent and to meet its benefit obligations throughout the long-range period 2003 through 2077 and beyond.”
The December 1 memo, addressed to Peter Ferrara, senior policy adviser on Social Security to the Club for Growth, asserts the feasibility of a plan similar to, but far more ambitious than, that proposed by President Bush during the 2000 election.
While running for President, Bush advocated a plan to allow workers to divert up to two percentage points from their 12.4% Social Security tax into private investment accounts. Such accounts’ funds, unlike Social Security contributions, would be like 401(k) accounts in that they would be invested in the private sector and would actually belong to the workers-transferable to their heirs upon death.
This memo extols a plan to divert, on average, a full 6.4% of payroll to such accounts. Although workers could choose to remain in the old Social Security system, the memo notes that “the nature of the plan would provide a high likelihood that available retirement benefits will be more” than Social Security currently pays beneficiaries.
Social Security, begun as a government-backed retirement plan under President Franklin Delano Roosevelt, is headed for a fiscal crisis as the U.S. population ages. Because there are more retirees and proportionally fewer workers than in the past, the payments into the system will fall below disbursements for the first time around 2018, according to the SSA. As the imbalance heightens, Social Security will be bankrupt by 2042, and face an enormous unfunded liability for the future.
Solutions to the problem include cuts in benefit payments, a hike in the retirement age at which payments begin, or a hike in Social Security taxes. Conservatives point to private retirement accounts as a politically feasible fourth option that would increase private investment and savings while allowing Americans to keep more of their own money.
The memo emerged just as Republicans, preparing for this year’s elections, are looking for popular conservative causes to embrace.
Rep. Pat Toomey (R.-Pa.), a leader on the issue of Social Security reform, told HUMAN EVENTS that he plans to use the issue in his high-profile Republican primary campaign against liberal Sen. Arlen Specter (R.-Pa.), who he said is vulnerable on the issue.
“[Specter] has always resisted any idea of reforming Social Security,” said Toomey, who addressed last year’s Conservative Political Action Conference (CPAC) on the issue.
Noting that President Bush’s campaign advisors have recently signaled a willingness to campaign on the issue in this year’s general election, Toomey welcomed the opportunity to campaign in harmony with Bush’s reform message.
“The study done by the Social Security Administration confirmed what we all knew-that this is a very doable project and it has tremendous financial benefits for the long-term solvency of Social Security,” he said.
Although it was once referred to as the “third rail” of politics, the issue of converting Social Security to private accounts took on new life in 2000 when Bush dared to address it extensively, pointing out Social Security’s impending fiscal crisis. After this widespread dissemination of the idea, public opinion polls began to show that most segments of the population-especially younger voters-favor private accounts. A late October Gallup poll showed that 62% of Americans support the conversion to personal retirement accounts.
In 2002, Republican candidates across the country reaped the benefits of Bush’s bold stroke. Social Security reform became an issue in seven different Senate races won by Republicans-including tight contests in Minnesota, New Hampshire, and Colorado-as well as a handful of close House races (see “Election Gives Bush Mandate for Growth”).
The best use of the issue may have been that of now-Sen. Elizabeth Dole (R.-N.C.). Derided by her opponent in a debate for supporting private accounts, Dole held up a blank piece of paper and told the televised audience that it represented her opponent’s plan to save the ailing Social Security system.
Democrats have delayed needed reforms to Social Security for years by stirring fears among senior citizens about changes to the current system. In many past campaigns, they have even accused Republican opponents or Republicans in general of trying to take away senior citizens’ retirement checks.
But 2004 may be an even better year to address the issue head-on in election campaigns. The Democrat presidential nominee-apparent, former Vermont Gov. Howard Dean, famously said in 1995 that he favored cutting Social Security benefits and raising the age at which payments begin.
“The way to balance the budget is for Congress to cut Social Security, move the retirement age to [from 68] to 70, cut defense, Medicare and veterans pensions, while the states cut almost everything else,” Dean said at the time. “It would be tough but we could do it.”
Although he has been careful to back away when confronted by this statement, Dean’s words may make him the Democrat least able to exploit the issue in a general election against President Bush.