It has been a rough couple of weeks for the Bush administration and the idea that the Social Security system requires reform and that individual accounts should be part of that reform. A Pew Research Center poll showed that, after a month of selling the idea, the percentage of Americans who said they favor individual accounts fell to 46 percent, from 54 percent in December and 58 percent last September.
That doesn’t sound like very good selling. But Mike Tanner, who has been the Cato Institute’s point man on Social Security reform, said it’s too early to panic.
“The White House sees this as a two-part campaign,” Tanner said. “The first goal was to sell the urgency of the situation, to convince people that something needed to be done … sooner rather than later. The second phase will be persuading people that individual accounts make sense, and that phase hasn’t begun yet.”
There’s some evidence that the president has succeeded in his first goal. A New York Times/CBS News poll that shows 51 percent of Americans opposing individual accounts also shows two-thirds agreeing with the president that the system will be bankrupt by 2042 if nothing is done. Sixty-one percent say the next generation will need a different system and 55 percent say the problems are serious enough that they should be fixed now, compared to 35 percent who thought the politicians could wait 10 years or so to address the problem.
We suspect the White House underestimated the depth and virulence of opposition to individual accounts and the swiftness with which groups like the American Association of Retired Persons and the AFL-CIO were able to raise the kind of fear that leads to knee-jerk opposition to change. Consequently it faces a more difficult challenge than anticipated.
In addition, it is seeing something resembling panic among congressional Republicans, their memories seared by unexpectedly intense opposition in town meetings back in their districts during a recess. Both Senate Majority Leader Bill Frist and House Majority Leader Tom DeLay flirted with the idea (presumably until the White House admonished them) of not bringing reform to a vote this year.
We would suggest that as it begins to sell the idea of individual accounts that the White House abandon the green-eyeshade stuff about just when the system will start to go into the red and focus on the potential advantages of individual accounts.
There are three popular and populist arguments in favor of individual accounts: ownership, inheritability and choice.
Retirees love to hear promises from politicians that Social Security benefits are safe and will never be reduced, but in fact Congress can change benefits at will, and, if nothing is done, it will have little choice but to reduce benefits or raise taxes to even more onerous levels. That makes the idea of an account that the individual rather than the government owns and controls attractive, especially if it is almost certain to accumulate more than what Social Security would “guarantee.”
The inheritability of individual accounts would allow poorer (and other) families to pass something on to their children and begin to build actual wealth rather than rely on the promises of politicians. That should be attractive to all, once it’s explained properly.
Then there’s the attractiveness of choice. Although there’s no administration plan on the table (which might have been a tactical mistake), every personal retirement account plan suggested so far has permitted choice. Those who prefer the politician-backed guarantees of the current system would be able to opt for them. Those who believe the markets would offer a better return would have that option. What’s not to like?
To succeed, however, the administration must be honest about the fact, as Robert J. Samuelson pointed out on these pages recently, that a transition to personal accounts — which will involve borrowing to cover the fact that money put into personal accounts will not be available to cover current retirees — will not solve the stress on the system created by the retirement of the baby-boom generation between 2011 and 2029. Several personal account proposals are on the table, some of which would improve the system’s solvency over a longer haul. But none fixes the baby-boom problem.
The Bush administration deserves credit for raising this ticklish issue and sticking to its guns so far. We hope it moves toward more stress on the advantages of personal accounts. It will be an uphill battle.