Finally, some constructive discussion on solidifying and reforming the Social Security system. The two commentaries on the front of today’s Perspective section are both timely and refreshing in light of all the screaming and arm-waving since George W. Bush made reforming the system a top priority of his presidency.
Unless Congress takes action, Social Security will slip from a surplus to a deficit sometime in the not-too-distant future. While Bush wants to turn the looming crisis into an opportunity to partially privatize the system, Democrats warn of dire consequences and insist the problem isn’t as bad as the president and congressional Republicans claim.
The Democrats are wrong. The only way to save Social Security as presently structured is to continue raising the retirement age, cut benefits or raise taxes — or a combination of the three.
Although privatization isn’t a panacea, it would accomplish two important goals. First, it would finally link the system to the free-enterprise engine that creates wealth, allowing retirement funds to grow. Second, it would shift control of Social Security contributions to the workers who make them, and away from politicians.
Phil Kerpen of the Free Enterprise Fund explains a proposal that is gaining momentum in Congress and supported by several members of Arizona’s congressional delegation that would put the current Social Security surplus off-limits to politicians. Those are the dollars that workers could use to open their individual retirement accounts.
The plan has much to commend it, including forcing Congress to be more fiscally responsible. The Bush administration and the GOP Congress have shredded the formerly bedrock Republican principle of fiscal conservatism in favor of even more porkbarrel spending.
Meanwhile, Valley lawyer Marc Lieberman, whose firm has advised the trustees of Arizona’s pension plans, argues for reforms that would allow Social Security’s trustees, rather than individual workers, to invest in equities. There is merit to that approach, as well, not the least being that many state and local governments have been doing this for many years, with good results.
But there are downsides as well, not the least being that some government pension trustees have made terrible investments, plunging their funds into crisis. Government investment of tax funds also is susceptible to political manipulation and outright corruption. Also, the enormous size of the potential investments made by the Social Security Trust Fund could prove disruptive to equity markets.
The partial privatization path that allows individuals ownership and control of their Social Security contributions is the best option. And legislation that ends Congress’ notorious raids on the trust fund is an excellent place to start.