by John Bussian, Guest Columnist
Were the country not at war, easily the biggest issue in the presidential campaign would be President Bush’s plan to save Social Security benefits for younger workers.
The issue isn’t just a curiosity, to see if the plan would work. It is a necessity if workers below the age of about 40 are to have any chance of receiving Social Security benefits they have been led to believe will be there at retirement.
The president’s plan, part of the “era of ownership” that would mark his second term, allows all but the workers closest to retirement (whose Social Security payments and benefits would be preserved in their present form) to own some of their Social Security contributions in private investment accounts, much like 401(k) retirement accounts. Contributions held in these accounts would grow at market rates instead of being consumed by the government’s need to pay those already retired and receiving Social Security benefits.
The proposal is monumental not only because it represents the best chance to make the Social Security system solvent, but also because it represents a fundamental downshifting of the country’s demand for government-operated services.
To proponents of fixing the doomed Social Security system now, rather than when it runs out of money to pay retirees, the president’s plan makes perfect sense. Federal Reserve Chairman Alan Greenspan has warned repeatedly that there is no way the federal government can pay benefits to the young workers of today — when they retire — let alone to our children and grandchildren, until we “recalibrate” the Social Security system. And that means moving away from a pay-as-you-go system, one in which current workers’ contributions fund Social Security payments to current retirees without setting aside some of the money to pay those who are making the contributions.
Only 3.3 workers support each Social Security beneficiary today, down from 50 workers for every beneficiary in 1954.
Far from being the “disaster” for America’s middle class that Sen. John Kerry trumpets, the president’s plan addresses the Social Security crisis that Kerry ignores and does it in a way that maximizes the chances that America’s young and future workers will have retirement funds — because workers will own them — when they become eligible to draw Social Security.
To be sure, there will be a short-term cost for allowing young workers to channel Social Security contributions into investment accounts of their own. Yet the cost is not the “hole” that Kerry bellows about. Whether the country, through those elected to Congress, decides to fund the payment of benefits to current retirees through short-term borrowing or through cuts in other parts of a bloated federal budget, the need for this funding will gradually be reduced as workers with Social Security investment accounts begin to fund part of their retirement.
The important point is there will be no reduction in benefits to those currently receiving Social Security or those about to become eligible. Those folks made a deal with the government and have every right to expect to receive what they were told they paid for over a career.
The rest of us know the grim reality of Social Security: Unless something is done to fix it now, we have no hope and should harbor no expectation that it will be there when we retire.
The beauty of the plan to save Social Security through private investment accounts is that it offers hope that funding retirement can be a better picture in the hands of workers than it is in the hands of government.
John Bussian is a Raleigh, N.C.-based lawyer who represents the Clovis News Journal and other media.