My Turn: Social Security 'reform' will bankrupt system

Posted: Thursday, February 03, 2005

The Bush administration has begun its assault on Social Security the way it began many other policy initiatives: with a wide-ranging disinformation campaign. Consider the following next time you hear rosy talk about private retirement accounts.

Social Security is essentially an insurance account to keep people from being destitute in their old age. It's not an investment program, but rather was designed to be beyond the vagaries of markets and inflation. Before it was enacted, a large proportion of the poor were elderly, who, because of low earnings, poor savings habits, health problems or simple bad luck, ended up unemployed and broke in their later years. America as a country decided to address this problem.

Contrary to what many may think, there is no pot of Social Security money being put in an individual account for us. Basically, our Social Security taxes are used to pay present retirees, and the money we pay to support our elders is our assurance that someday our young people will support us if we need it. However, due to the population bulge of the baby boom and longer life spans, a time will come in 2018 when money paid into the Social Security account will be smaller than the payments going out. If this shortfall is not addressed, Social Security will not be able to fully meet its obligations after the year 2042.

Enter the phony "solution" of private retirement accounts. In this scenario, you would not put all your withholding into Social Security, but instead would open an account at your favorite Wall Street brokerage. Regardless of your confidence in your ability to outfox the markets, the problem is that any money put into these private accounts is money that is not being used to pay our already extant obligations to Social Security. If, for example, people put $100 billion into private retirement accounts, the government has to borrow $100 billion to make payments to retirees. Alternately, it can elect to not borrow the money, and move the date of insolvency closer. In other words, the Bush administration purports to "reform" Social Security by bankrupting it.

A large number of impartial economists hold that Social Security can be saved by slight tax increases on the revenue side and by minor adjustments on the benefit side, such as raising the retirement age to reflect longer lifespans. Other ideas are raising the cap on salary that is taxed, or not giving benefits to those who don't need them. One thing that no serious analyst mentions as a solution to the problem is private retirement accounts. The Bush administration, urged on by its Wall Street backers, holds out false hopes of salvation through privatization while it works steadily to dismantle this long-standing and effective safety net for our elderly.

If you value your Social Security pension, you need to call your political representatives now and tell them how you want real solutions, not bogus schemes hatched by men who's only interest in old-age pensions is getting a piece of yours.

•Stuart Cohen is a novelist and businessman living in Juneau.

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