I am afraid that by working so hard to convince people Social Security is unsustainable as currently structured, we have left the impression inadvertently that the costs and risks of personal accounts exceed their benefits for large numbers of people. That is a huge misconception, of course, but the disinformation campaign being waged by the Democrats and their allies, AARP and MoveOn.org, seems to be reinforcing our own message and making it a reality in the minds of a growing number of people.
That puts us in a solvency trap requiring tax increases and benefit cuts because as sure as the sun rises in the east, Democrats will never agree to a "fix" that cuts benefits without also raising taxes. Indeed, even some Republicans have fallen into this trap.
People perceive a fundamental inconsistency at the center of our argument, which is creating confusion in their minds and leading them to tell pollsters they don't support what the president is trying to do on Social Security. That inconsistency results from the fundamentally false premise upon which our approach seems to be built, namely that the nation cannot "afford" personal retirement accounts large enough to solve Social Security solvency's problem.
The reason so many conservatives seem to believe this is that they ignore the fundamental flaw of the current Social Security system: It is built on a huge mountain of debt.
Workers' payroll taxes are not saved in a trust fund or anywhere else; they are, in effect, borrowed from current workers to spend on current Social Security benefits for seniors. This means any payroll taxes workers would be allowed to save and invest through personal retirement accounts is less debt the government would have to pay back to workers in the future.
In other words, personal accounts reduce government indebtedness. Therefore, if we let workers keep part of their payroll taxes and simply turn around and reborrow (i.e., refinance) from the public to pay all currently promised benefits without raising taxes, we won't have incurred a new dollar of debt; we would simply refinance an old debt by another means and amortize it over at least 30 years just like a home, a highway or an aircraft carrier.
The Chief Actuary of Social Security has scored four separate personal retirement account plans that achieve solvency without raising taxes or cutting benefits. One of those plans, the Ryan/Sununu proposal, is so clean, so unambiguous that it dispels any confusion in people's minds about the efficacy of personal retirement accounts to fix Social Security and make it solvent permanently. As workers shift their payroll taxes into the accounts, the responsibility for paying their future promised benefits also shifts to the accounts under a specific formula in the bill, which results in the reductions in Social Security expenditures each year. After all workers are fully invested in personal accounts, 95 percent of the retirement benefits paid under the Social Security program will be coming from the accounts, and those benefits are guaranteed to equal or significantly exceed what workers are promised by Social Security currently.
Republicans have a great opportunity to help President Bush democratize our capitalistic economy and make every worker an owner by getting behind a personal accounts proposal, such as Ryan/Sununu, that achieves full solvency without raising taxes or cutting benefits.