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Just say no
Bush’s Social Security plan is a phony solution to a nonexistent problem

Most Social Security benefits are paid to elderly retirees. But George W. Bush is aiming his pitch to "reform" the venerable program straight at folks who are members of Gen X or younger. The president’s divide-and-conquer strategy is to tell those 55 and older that he’ll protect their benefits, while warning younger workers that the system will be "bankrupt" by the time they retire.

It’s not true, but Bush’s reckless rhetoric is having an effect. According to a recent poll commissioned by Fox News, 57 percent of respondents agreed with the proposition that "[t]he Social Security system is in a state of crisis," while just 33 percent disagreed. Support for the private retirement accounts Bush proposes was considerably more mixed; but, having succeeded in fomenting an artificial sense of crisis, the president may be creating the conditions he needs to carry out his radical plans.

When it comes to Social Security, Bush’s rhetoric calls to mind the old Mary McCarthy line about Lillian Hellman: every word out of his mouth is a lie, including "and" and "the." Take, for instance, this statement from Bush’s State of the Union address: "Thirteen years from now, in 2018, Social Security will be paying out more than it takes in. And every year afterward will bring a new shortfall, bigger than the year before." This is technically accurate: starting in 2018, the Social Security trust fund will begin paying out more in benefits than it receives in revenue. But that fact is completely irrelevant to the way Social Security works. That’s because Social Security, in large measure, is a pay-as-you-go program. Taxes taken out of your paycheck go mainly to today’s retirees. The trust fund is a phony issue, raised as a scare tactic.

Or take this Bush assertion: "By the year 2042, the entire system would be exhausted and bankrupt. If steps are not taken to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs." When Bush spoke these words during the State of the Union, a number of Democrats hooted and cried, "No! No!" As well they should have. Again, Bush was referring to the exhaustion of the trust fund — which, according to estimates by the Congressional Budget Office, will actually take place in 2052, not 2042. But just because the trust fund runs out of money does not mean that Social Security will go bankrupt. In fact, the very word "bankrupt" is meaningless in the context of a government program whose finances are controlled by Congress and the president.

Moreover, experts who have studied the system say that even after 2052, with no trust fund at all, Social Security should be able to continue paying between 75 percent and 80 percent of promised benefits through 2080, and possibly beyond. And that’s without making any significant changes. Taking such common-sense steps as raising the cap on income subject to the payroll tax — it’s now just $90,000, making it among the most regressive of taxes — would go a long way toward closing the benefits gap. So would applying a means test to limit payments to wealthy retirees, or raising the retirement age to reflect increasing longevity. The age at which full Social Security benefits are paid is already in the midst of rising from 65 to 67. Perhaps, as increasing numbers of Americans live into their 80s or 90s, it might make sense to raise the age to 70. Certainly that makes more sense than wrecking a popular and successful program, as Bush proposes.

But if Bush’s scare tactics are based on lies, does it necessarily follow that the private accounts he wants to create are a bad idea? The president has proposed letting younger workers set aside a portion of their Social Security taxes — say, one-third — and place it in one of several government-approved investment funds. "Your money will grow, over time, at a greater rate than anything the current system can deliver," Bush said. That’s an appealing prospect. And it’s understandable that people many years from retirement — especially those 40 and younger — would like an opportunity to take part in such a system rather than depending on a Social Security safety net that they’ve been told is in "crisis" and going "bankrupt."

But there are several vital facts that Bush leaves out. First, because payroll-tax revenue diverted into personal accounts would not be available to pay today’s Social Security recipients, their creation would, over the next two decades, be financed by massive government borrowing — $4.5 trillion, according to some estimates, with the money to be paid back by cutting benefits at some point in the future. Second, it is by no means certain that private accounts will earn more interest than the current Social Security system. In fact, there will be winners and there will be losers. The creationists in the White House may not think much of Darwin, but they’re certainly social Darwinists when it comes to their relentless push to privatize retirement.

Finally, Bush’s loose talk about personal retirement accounts omits the fact that everyone should already have such an account — an IRA, a 401(k), and the like. Indeed, money managers generally tell their clients that they should have three forms of retirement income: a company pension, if it’s available (and, increasingly, it’s not); a personal retirement account; and Social Security. The last is a form of insurance — a floor below which no American should be allowed to fall. By seeking to transform Social Security into just another type of IRA, Bush would undermine the one form of retirement income that is supposed to be inviolable.

Bush’s Social Security proposal is a phony solution to a nonexistent problem. Fortunately, congressional Democrats are relatively united on this issue, with most of them vowing to defeat this assault on Franklin Roosevelt’s legacy. The new Democratic leader in the Senate, Harry Reid, has referred to the Bush plan as "Social Security roulette," an apt description.

It’s not unusual for second-term presidents to overreach. Bush, an arrogant and hubristic leader who loves nothing better than to talk about his nonexistent "mandate," would seem especially ripe for a fall. In the 1980s, Democrats rediscovered their voice when Ronald Reagan threatened Social Security. Perhaps Bush’s far more dangerous proposal will provide a similar opportunity.

What do you think? Send an e-mail to letters[a]phx.com


Issue Date: February 18 - 24, 2005
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