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False Facts Form Social Security Reform

"What fate for Social Security reform?" That was the question Sean Tuffnell asked in a recent insightful opinion column for the Washington Times. He concluded, based upon his work heading up a voluntary educational-outreach initiative on Social Security around the country: "While Washington is reluctant to talk about Social Security, there is a tremendous interest outside the Beltway."

The White House may already have gotten that message. Several weeks ago, the president’s chief of staff, Andrew Card, said Congress should be ready to revisit Social Security reform next year. Vice President Cheney recently said that although the administration does not intend to focus on fundamental tax reform this year, Social Security reform may move forward.

That’s good news, but has the administration learned a lesson from the Social Security reform dud it launched last year? Tuffnell contended that those reform efforts were plagued by sound-bite shallowness, negativity and partisanship, both by proponents and opponents of personal retirement accounts. Unable to gain traction, Social Security reform soon became overtaken by tsunamis, hurricanes, Supreme Court vacancies and Jack Abramoff scandals.

The overriding reason Social Security reform fizzled out, however, was that the president’s staff gave him incredibly bad information and left him stranded in a political minefield trying to defend a flawed concept — not even a specific proposal — that the American people would not buy. The concept was that the level of retirement benefits Social Security currently promises is unreasonably high, and therefore future benefits must be cut to restore solvency to the program. Only after solvency is restored can personal accounts be added on later.

This is factually wrong, and it is an invitation to demagoguery from the left. With gas prices again on the rise, Iraq, Iran, the NSA controversy, congressional corruption scandals and now a Medicare prescription drug program causing havoc among seniors, the last thing this administration needs is an attack from the left on cutting seniors’ future Social Security benefits.

It is unnecessary and counterproductive to approach Social Security reform by drawing a false distinction between solvency and personal accounts. The chief actuary of Social Security has scored several different reform proposals based upon personal retirement accounts as achieving full solvency without cutting benefits, raising taxes or raising the retirement age. Moreover, numerous studies have demonstrated that with a properly designed personal-accounts reform plan, not only is it not necessary to cut seniors’ future retirement benefits, benefits actually will increase with personal accounts while totally eliminating the program’s long-run unfunded liability.

Proposing to cut future Social Security benefits is a lose-lose proposition for a Republican president. If he fails to convince Democrats to go along with him, they will play the Social Security card with a vengeance and pillory him with senior voters. If he succeeds in convincing Democrats to join hands with him in jumping off the benefits-cut cliff, it will only be because they will have forced him to give them a political parachute – namely, to raise taxes, as well. One can hear the rationale now: We can’t achieve solvency on the backs of retirees without also raising taxes on workers as well. Ugh!

It’s too early to tell whether the administration has learned the right lesson from its failed reform efforts last year, but it is clear that Rep. John Boehner, R-Ohio, one of three candidates for House majority leader, has wandered back into the same minefield. Over the weekend, Boehner responded to a question from the Republican Study Committee about entitlement reform by saying, "Some big projects are best broken up over multiple years, and Social Security is a good example. If we first address the trust fund’s solvency, we’ll build public trust toward future reforms, such as private accounts." That’s code for "first cut future benefits and/or raise taxes to achieve solvency before thinking about adding personal accounts on to the system down the road."

With all due respect, that is precisely the flawed logic that led us into a dead end on personal retirement accounts last year. By drawing a false distinction between solvency and personal accounts, he is setting us up for a political disaster once again.

If the Congress and the president allow their leadership and staff to base Social Security reform on this false distinction, they will have succeeded in turning the juice back on to the third rail, and it won’t be the Democrats who get electrocuted.

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Mr. Kemp is founder and chairman of Kemp Partners, which has done work on behalf of corporate defendants in asbestos litigation reform. Kemp is honorary co-chairman of the Free Enterprise Fund.

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