It is unnecessary and counterproductive to approach Social Security reform by drawing a false distinction between solvency and personal accounts. The chief actuary of Social Security has scored several different reform proposals based upon personal retirement accounts as achieving full solvency without cutting benefits, raising taxes or raising the retirement age. Moreover, numerous studies have demonstrated that with a properly designed personal-accounts reform plan, not only is it not necessary to cut seniors' future retirement benefits, benefits actually will increase with personal accounts while totally eliminating the program's long-run unfunded liability.
Proposing to cut future Social Security benefits is a lose-lose proposition for a Republican president. If he fails to convince Democrats to go along with him, they will play the Social Security card with a vengeance and pillory him with senior voters. If he succeeds in convincing Democrats to join hands with him in jumping off the benefits-cut cliff, it will only be because they will have forced him to give them a political parachute - namely, to raise taxes, as well. One can hear the rationale now: We can't achieve solvency on the backs of retirees without also raising taxes on workers as well.
Ugh!
It's too early to tell whether the administration has learned the right lesson from its failed reform efforts last year, but it is clear that Rep. John Boehner, R-Ohio, one of three candidates for House majority leader, has wandered back into the same minefield. Over the weekend, Boehner responded to a question from the Republican Study Committee about entitlement reform by saying, "Some big projects are best broken up over multiple years, and Social Security is a good example. If we first address the trust fund's solvency, we'll build public trust toward future reforms, such as private accounts."
That's code for "first cut future benefits and/or raise taxes to achieve solvency before thinking about adding personal accounts on to the system down the road."
With all due respect, that is precisely the flawed logic that led us into a dead end on personal retirement accounts last year. By drawing a false distinction between solvency and personal accounts, he is setting us up for a political disaster once again.
If the Congress and the president allow their leadership and staff to base Social Security reform on this false distinction, they will have succeeded in turning the juice back on to the third rail, and it won't be the Democrats who get electrocuted.