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Social Security Snares & Delusions

From the January 17, 2005 issue: How not to squander political capital.

Jan 17, 2005, Vol. 10, No. 17 • By IRWIN M. STELZER
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PRESIDENT BUSH WANTS TO REFORM the Social Security system. He is right to want to transform the system into one that meets the needs of an America whose economy and demography markedly differ from the day when Franklin Roosevelt put this safety net in place. He is right, too, to have decided to allow debate on the best way to accomplish this transformation to go on for a while longer before he commits himself to a particular set of proposals that would significantly change a system that many Americans have come to regard as the compassionate face of capitalism.

Some Democrats, predictably, have taken to the barricades to oppose any change, either out of an attachment to a system that represents one of their party's historic achievements, or out of sheer political calculation or spite. They are unlikely to be persuaded by whatever evidence is marshaled in support of change. But for now at least, even centrist Democrats, many willing to consider reforming the system, are lining up to oppose the president, as is the supply-side, deficits-don't-matter (or not very much) wing of his own party. Former House speaker Newt Gingrich and Jack Kemp are warning that the president's plan to "reduce benefits" could cost the Republicans control of Congress. And while most Republican senators and congressmen of course want to be with the president, they are nervous about facing political fire without at least a modicum of bipartisan support to provide "political cover." So far, that cover just isn't available.

Those of us who know that change is needed are hoping that the president's decision to delay specific proposals is not merely intended to give his staff more time to hone its presentational skills, but will permit a substantive debate that will, in the end, result in improvements to the plan now on the White House drawing board. For unless the president considers some important modifications of his plan, his crusade could become for him what health care reform was for Bill Clinton--at least a waste of energy and political capital, at worst a political debacle.

How could one reform Social Security in a way that could result in a financially sound system, stimulate economic growth, improve the fairness of the existing system, and gain support from all save the "no, not now, not ever" crowd?

Start with the reason most offered for reforming the system: that owing to the impending retirement of the nation's baby boomers, the system is on the brink of financial insolvency. Or, if not on the brink, headed toward it. That may be, but is not certainly, true: Some estimates show that taxes currently earmarked for the program, along with earnings on the Social Security Trust Fund (for our purposes let's assume that there is such a thing, rather than reopen the tiresome debate about the "lockbox") will cover outlays until 2028. Others put the date at which the current system will be unable to pay all promised benefits at 2042.

And possibly later. For one thing, if the economy grows more rapidly and efficiently than some predictions suggest, the current system might well prove capable of meeting all of its obligations. Improvements in productivity at rates of recent years, for example, will allow the workforce to support a higher ratio of retirees than is now the case; more rapid economic growth will generate more revenues for the system than some of the middle-scenario forecasts assume.

Besides, we should be careful before spending a great deal of energy worrying about the financial condition of retiring baby boomers. This is not the 1930s, when even retirees who had worked hard, and scrimped, faced a difficult future. This is the 21st century, when many retiring baby boomers will have substantial assets that make them less dependent on their Social Security checks to make up as high a proportion of their retirement income.

Indeed, a case can be made that by putting the issue of Social Security reform on the backburner for several years we would not be emulating Mr. Micawber but, instead, heeding the interdiction widely attributed to Ronald Reagan: "Don't just do something, stand there." After all, in the face of the uncertainties surrounding global warming, the administration has quite wisely avoided the temptation to join the world in overreacting, in "doing something" before it is clear that anything needs to be done, or, if it does, just what. What makes sense for environmental policy might make equal sense when it comes to social policy.

BUT WE SHOULD NEVER discourage politicians bent on prudence. So let's assume that there indeed is an impending problem, and that the president is right to contend it is his responsibility to solve that problem now, rather than to burden his successors with the chore.