Philadelphia Inquirer, December 12, 2004
Sometimes the news makes me laugh out loud. Here's a good one:
"On Social Security," reported the New York Times last week, "45 percent said a proposal to permit people to invest their Social Security withholding money in private accounts was a bad idea; 49 percent said it was a good idea."
Get it? The NYT/CBS poll cited here asked people whether they would like to have a choice about what happens to their tax dollars. No wonder almost half said yes.
What the pollsters inadvertently left out of the question was the down side: big cuts in Social Security benefits.
That's right, according to Reform Plan 2 of the carefully misnamed "President's Commission to Strengthen Social Security," this partial privatization would mean a sizeable loss of benefits for most Americans.
A 20-year-old just entering the labor force would lose 34 percent of his or her expected benefits under this plan. This would amount to almost $134,000 over a lifetime of retirement. They would have a chance to gain back, on average, about $47,000 of this from an individual account -- provided the stock market doesn't tank like it did from 2000-2002, just in time for their retirement.
For the next poll, here is a more accurate question: would you like to see your Social Security retirement benefits cut by 34 percent, and have a chance at getting back a fraction of that from a private account? That's for the young workers. The amount of the cuts decreases as you move up the age ladder, but the plan still provides a net loss for the vast majority of Americans.
How many people do you think would say yes to a deal like that? But that's the deal that President Bush appears to be offering. His commission, which unlike other such bodies was stacked with people who favor privatization, came up with three plans. Mr. Bush hasn't explicitly chosen one, but shortly after the November 2 election he indicated that he is talking about Reform Plan 2.
Note to journalists covering this issue: let's get the headline news up front. Big cuts to create private accounts, and for what? So that people can invest some of their Social Security taxes in a stock index fund? We already have a number of means by which people can take their earnings tax-free and put them in the stock market, such as Individual Retirement Accounts or 401 (k) accounts. Yet less than 5 percent of employees are taking full advantage of these opportunities.
It would be a good idea for the Federal government to make such retirement savings accounts more universally and cheaply available. But there is no need to raid Social Security, and cut benefits, to do that.
Nor is there any reason to "fix" Social Security any time soon. According to the numbers used by everyone, including the President's Commission, Social Security can pay all promised benefits for the next 38 years without any changes at all. The non-partisan Congressional Budget Office just upped that estimate to 48 years. By either measure, Social Security is in better financial shape that it has been for most of its 69-year history.
Any shortfall that might occur forty or fifty years from now will be easily manageable, and less than we have dealt with in the past, when we had much less income.
Yet Social Security "reformers" have spent the last decade and a half convincing most of the public that Social Security is in dire straits. Now they offer us a plan that will cut benefits, add untold hundreds of billions of dollars to our already oversized federal budget deficits, and increase Social Security's administrative costs more than ten-fold.
And for what?