During the presidential election, President Bush and many Republican congressional and senatorial candidates campaigned on reforming Social Security by creating personal retirement accounts that workers own and control. By virtue of their solid win, Republicans now have a clear mandate to enact this reform.
Personal accounts are supported by large majorities of the American people in every poll, including Democrats, blacks, Hispanics, labor and other traditionally liberal groups. That said, Republicans must be extremely careful how they implement this reform. Opponents of personal accounts will be looking for any early Republican stumble that can be used to discredit the personal account reform.
Cutting future Social Security benefits or raising the retirement age, as some "green-eye shade" Republicans are suggesting to help pay the transition costs, are not part of the GOP's mandate, and neither idea should be on the agenda. The public also overwhelmingly opposes both ideas in every poll.
Republicans would be foolish to allow Democrats to say that the first thing Republicans did as soon as they got firm control over the government is go after Social Security benefits. And advocates of personal accounts would be foolish to get sidetracked into supporting politically disabling Social Security benefit cuts, instead of what they are really for, and, indeed, have already won politically.
Because it is so obvious the public opposes Social Security benefit cuts, those who obsess over the transition costs of moving to personal accounts have come up with stealth benefit cuts to slip past the American public. This idea, which is being aggressively urged on Republicans, is called price indexing - benefit cuts by another name.
Currently, during taxpayers' working years, the initial level of retirement benefits to which they will be entitled rises each year at the same rate as average wages increase. It's called wage indexing. As a result, when workers retire in the future, Social Security benefits will continue to comprise about the same percentage of their pre-retirement incomes as Social Security does for today's retirees.
In more technical jargon, the replacement rate remains the same over time. Currently, Social Security replaces about 42 percent of pre-retirement income for average-income workers and 28 percent for higher-income workers.