Hi 75 / Lo 58
|Volume 70, Issue 77,
Tuesday, January 25, 2005
Republicans lead Social Security reform
During the 2004 presidential campaign, a television ad produced by a left-leaning organization caught my attention. The ad's narrator spoke of presidential qualities, and depicted an ostrich with its head buried in the sand, then transitioned to an eagle soaring through the air. The implication, of course, was that President George W. Bush was the stubborn ostrich with his head in the sand, and former presidential candidate Kerry was the majestic eagle flying in the clouds. If the ad was referring to the war on Iraq, it was a good characterization.
When viewed through the lens of the Social Security reform issue, however, the roles are unquestionably reversed. While Bush campaigned for progressive reform of the nation's retirement system, Kerry refused to even acknowledge any problem existed. In effect, it was Kerry who had buried his head in the sand on this issue. Today many Democrats are living in an equally sanguine sense of denial of the problems with social security, declaring that, "There is no crisis."
I guess it depends on what the definition of crisis is.
The Cato Institute reports the following well-researched indicia of an impending crisis: Social Security will begin running a deficit by 2018; the program faces an unfunded liability of more than $26 trillion; "saving" Social Security without individual accounts could require a 50 percent increase in Social Security taxes or a 27 percent cut in benefits; if nothing is done, by 2060, the combination of Social Security and Medicare will account for more than 71 percent of the federal budget.
Even the most ardent opponents of Social Security reform acknowledge that in the coming decades retirees will have to face a cut or delay in benefits. The average monthly benefit in 2003 was about $880, according to the Cato Institute. Given the country's growing budget and trade deficits, which weaken the value of the dollar, and the rising costs of inflation, future retirees face a real risk of facing their golden years in financial disaster.
Americans are being shortchanged by being forced to participate in Social Security as it is functioning today. The average rate of return on a worker's investment in the system is only 2 percent. Contrast that with the average 10 percent (7 percent after inflation) return provided by private markets for the past 75 years. If workers were allowed to place a portion of their retirement funds into a rationally diversified private investment scheme, they would be provided a much more plentiful return for retirement. Such a plan would have the added benefit of reducing the average citizen's dependence on the federal government, which would lower the government's liabilities.
Critics of reform have stated that privatization is too risky and radical a move to make. They forget, however, that for decades stock- and bond-market investing has been successfully used to fund pension plans for unionized policemen, firemen, teachers and yes, even congressmen. Our elected officials have been allowed to opt out of Social Security in order to take advantage of the power of private investments. It is only fair that private citizens be afforded the same opportunities as their elected officials in planning for retirement.
Democrats were responsible for initiating the Social Security program, and they should be proud of their achievements in providing a dignified existence for the nation's elderly citizens. It is in fact because the Democrats were responsible for the creation of Social Security that they owe the people a moral obligation to ensure its continued viability. Waiting to react to a crisis would be an astonishing dereliction of their duty to provide for the system's continuity.
Republicans, with their many associations with ethically corrupt corporations like Enron and Halliburton lack the credibility to really instill a high degree of public confidence in any Social Security reform package. Too many questions surround the selection of organizations that would be built up as a result of the injection of so much new private capital. If Democrats provide guidance as to the selection of diversification schemes, everyone will win. Republicans will get the bill they have been praying for, and Democrats can provide the People with increased secured retirement.
The Republicans have done a good job of stealing the Democrats' lunch on this issue, but if Democrats would only pull their heads out of the sand and take the reigns back on this matter, the likelihood of an acceptable reform package would be very high. Put partisan politics aside, and make our retirement secure again.
Richardson, an opinion columnist for The Daily
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