Leave personal accounts on the table

Posted: Mar 07, 2005 12:00 AM

The debate on Social Security and personal accounts is about extending and democratizing our capitalistic system so that every worker can become an owner. But the arcane debate over "actuarial solvency" was taken to a new level of absurdity on "Meet the Press" Sunday when Sen. Richard Durbin, D-Ill., accused President Bush of wanting to destroy Social Security and said personal accounts "don't address the solvency problem." To the contrary, personal accounts, properly designed, are the only economically rational way to make Social Security solvent and guarantee workers a secure and more prosperous retirement.

Bush says, "You ought to be allowed to take some of your own money and set it aside in a personal savings account that you call your own." It is, after all, your money - your FICA contribution to Social Security, 12.4 percent of your wages - and the government is not saving it on your behalf as it promised it would 20-some years ago when Congress raised the payroll tax rate for the 20th time.

Instead, the federal government, in effect, borrows most of that money from you to pay Social Security benefits to current retirees, who are now collecting on the debt the government incurred to them when, years ago, it took their FICA contributions to pay Social Security benefits to previous retirees, some of whom you continue to help pay for today.  When it's done paying current benefits out of your FICA contributions, the government raids the rest of the payroll tax revenues - the Social Security surplus - to pay for everything else from bureaucrats' paperclips to corporate welfare. 

The raid on Social Security revenues will end in 2018, when there won't even be enough of your FICA contributions coming into Washington to cover the entire cost of current Social Security benefits because there will be so few workers contributing to support all the current retirees.  And even if there were enough FICA revenue to cover all the promised Social Security benefits, by the time you retire, many of you will receive benefits little better than $1.01 for every dollar you contributed over your working years.  Some of you will actually recover less in benefits than you paid in FICA contributions.  You could have done better than that if the government had taken your 12.4 percent FICA contributions and put them in a passbook savings account for you at a bank.

The president is being attacked for saying he wants to fix the problem by allowing you to save and invest your money - put it in a passbook savings account at a bank if you want - through a personal retirement account that you can leave to you heirs if you die before you retire or before you consume it all during retirement. Since the government is already, in effect, borrowing your FICA contributions to pay current benefits, why worry about how those benefits will be paid when you are allowed to keep some of your FICA contributions to begin saving for your own retirement?  Every dollar the government allows you to save is a dollar-plus it won't owe you in Social Security benefits when you retire.  Personal retirement accounts actually reduce the government's indebtedness so that even if Congress turns around and reborrows that money from the general public, it hasn't increased its indebtedness.

There are plenty of means other than your FICA contributions to pay current Social Security benefits, which should be saved for your own retirement.  Why doesn't Congress cut out some of the billions of dollars of waste and corporate welfare and redirect that money to help cover current Social Security benefits?  Why not reform the tax code, as the president has urged, to spur economic growth and generate higher revenues to help meet those Social Security benefits?

Or after Congress has done as much as it can along these two lines, why not simply go ahead and borrow the rest since it's not really new borrowing anyway. The government was borrowing that money out of your FICA contributions before it reduced its borrowing by allowing you to save a portion of your FICA contributions in personal accounts. Why not turn around and borrow that same amount of money from a different source? It's no different from refinancing your house or a business refinancing its debt so it can invest to modernize its operation.

The president's critics say the president wants a "free lunch" on Social Security.  They excoriate him because he doesn't want to pay for personal accounts by hiking taxes or cutting benefits or making people work longer. He has even said he would put those heresies on the table for discussion if his critics would only sit down at the table to talk about how to fix the problem.

How have his critics responded? "Meet the Press" moderator Tim Russert asked Durbin: "So as long as the president insists private and personal accounts are on the table, will you not sit at the table?" Durbin responded: "I don't believe that we can. ... If the president takes privatization off (the table) ... we're ready to sit down on a bipartisan basis and put everything on the table." Durbin is saying Democrats are willing to sit down at the table to play only if the president allows them to stack the deck against him.

  If the alternative is tax increases, cutting benefits or making people work longer, the country would be much better off if the Democrats filibuster the president's personal-accounts proposal to death this year than if he gives in to their pigheadedness and takes personal accounts off the table. Let the Democrats obstruct passage of personal accounts, if they have the courage, and then let's go to the American people on the matter in the 2006 elections. That's the way democracy works, and we know that whatever the people decide will be right.

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