If the President and Republicans in Congress are going to be successful on Social Security reform, they need to advance legislation that focuses on personal retirement accounts, without tax increases or benefit cuts.
The problem with the message coming from Washington is that all the proposed ??¢â???¬?????solutions??¢â???¬ to fix Social Security solve Washington??¢â???¬â???¢s problems not the workers??¢â???¬â???¢. The focus needs to be on solving the workers??¢â???¬â???¢ problem, which is that Social Security pays too little, not too much.
The average worker is hearing that the politicians in Washington think Social Security pays too much and, therefore, benefits must be cut. They have heard others say that workers pay too little into Social Security so they should pay more. Still others have said Americans don??¢â???¬â???¢t work long enough and are proposing ??¢â???¬?????disincentives to retirement.??¢â???¬ So the message from Washington to the worker is: Work longer, pay more and get less.
Good Deal for Workers
Washington politicians have decided that it is better to make workers change than to have to change themselves. They think that raising taxes and cutting benefits is the only Social Security solution. If they actually had to implement a solution that was a good deal for workers they would have to set priorities, roll up their sleeves and make some tough choices.
If Washington were serious about Social Security reform, politicians would put an immediate stop to the continuing raid on the Social Security surplus. Not allowing politicians to spend the Social Security surpluses would force them to be honest about how much money they are already spending and the deficit would have to be reported as much larger than it already is.
The truth is that not only have all Social Security surpluses to date been spent on other things, the politicians in Washington want to go right along spending all future surpluses.
Raising taxes, as even some Republicans have proposed, will provide Washington only more money to spend. Since not one dime to date has been set aside to protect Social Security, why would anyone think that would ever happen in the future? Raising taxes would only mask the problem, allowing Washington to continue to raid the surpluses and leave Social Security even worse off.
Personal accounts owned by workers with higher benefits is the only way to ensure that money meant for retirement will not be spent. With large personal accounts, even low- and moderate-income workers will accumulate hundreds of thousands of dollars by retirement and will be able to leave a financial legacy to their children or other heirs. Personal accounts offer workers far greater personal choice, ownership and control than the current system.
Personal accounts that are large enough (around 6%) will also eliminate the long-term deficits of Social Security by shifting so much of those program??¢â???¬â???¢s promised future benefit obligations to the accounts that the program will be left in permanent surplus. Despite what has been said, personal accounts do solve the problem as confirmed by the chief actuary of Social Security, who has scored four personal account proposals as saving the program from bankruptcy without tax increases or cuts in future promised Social Security benefits.
As I describe in my book, Winning the Future (published by Regnery, a HUMAN EVENTS sister company), the ideal expression of this approach is the bill sponsored by Rep. Paul Ryan (R.-Wis.) and Sen. John Sununu (R.-N.H.), which was designed to maximize the net gain for workers, so it would have enormous populist grassroots appeal. [See the interview with Sen. Sununu on page 5.] It brilliantly maintains the social safety net by guaranteeing that all workers would get at least the benefits promised by Social Security under current law.
Ryan-Sununu also includes a federal spending-limitation measure and budget process reform to help finance the transition, and that would require Washington to make the tough choices instead of shifting the burden to the worker.
We know we can beat the Democrats and liberals on these grounds because we have already won election after election on personal accounts. John Zogby summarized the 2002 election cycle by saying that every race in which personal accounts were an issue, the pro-accounts side won. Ditto for 2004. None of these candidates, however, not one, campaigned on tax increases and Social Security benefit cuts.
For many years, the left has been saying that personal accounts would require huge benefit cuts. Those who advocate large reductions in promised benefits, such as shifting the basic benefit formula from wage indexing to price indexing, are effectively saying that this devastating political criticism is right.
Moreover, those advocating such future benefit cuts are effectively advocating tax increases as well. For there is no way that Democrats and liberals will allow any reform to pass that addresses the long-term deficits through benefit adjustments without including major tax increases. Once we wander into the swamps of cuts in promised Social Security benefits and tax increases, the Republicans, and personal accounts, are lost.
Personal accounts offer the prospect of an enormous, historic victory for conservatives, Republicans and free-market thinkers. But this is still a very dangerous and volatile issue, and if we mishandle it with bad and confused proposals, we gravely endanger the Republican majorities in Congress. That would be a disaster for conservatives on issues across the board.