The Editors
Shortly after his re-election, President Bush said: Hey, were going to reform Social Security, and I really mean it this time. He also wants to move quickly. In mid-January he told reporters that he wants his proposed reforms to be approved by Congress within the first five months of this year. To these flourishes, Congress and the rest of the country should reply: Not so fast, Mr. President. We need much more discussion of changes in the Social Security system and many more hard facts than have been available so far.

The Social Security system was created in 1935 primarily to provide for the elderly who had lost both jobs and savings in the Great Depression. It was sold as a pension program, but in fact it was a welfare program, since its early beneficiaries received benefits even though they had put little or no money into it. Younger workers were told that their contributions were being set aside for their retirement, when in fact most of the money was being used to take care of their elderly parents and grandparents. Likewise, when Medicare was instituted in 1966, benefits were immediately given to those who had paid nothing into the system.

This might have gone on forever if modern medicine and birth control had not altered the ratio of workers to retirees. Modern medicine increased the life expectancy of the elderly (and therefore the number of years during which they will receive Social Security and Medicare), and birth control decreased the number of workers available to support retirees. Furthermore, most people enter the workforce later today than they did in 1935, because they spend more time in school. Medicare is in much more trouble than Social Security because health care costs, especially for the elderly, are rising much faster than wages. Over the years, the government responded by increasing payroll taxes to the point that many workers now pay more FICA tax than income tax.

Because Social Security (unlike Medicare) takes in more money in payroll taxes than it distributes in benefits, it has built up a trust fund of more than $1.5 trillion. Since this money is loaned to the federal government, if the fund were drawn down, the government would have to find other lenders (and pay higher interest rates), increase taxes or cut programs like Medicare.

The American Association of Retired Persons thinks Social Security can be kept solvent by gradually increasing taxes on workers. Others argue that since people are living longer, the retirement age should be raised. And those who see Social Security as a quasi-welfare program argue for reducing benefits for the rich elderly. After all, much of the wealth in this country is owned by people over 65. Any bipartisan compromise on Social Security and Medicare reform would have to include all these elements, but at this point the Republicans refuse to yield on taxes, and the Democrats refuse to give in on benefits.

But the presidents proposal to privatize Social Security is much more radical than reforms that have been proposed in the past. It would allow and encourage younger workers now entering the system to divert a third or more of their payroll taxes into personal accounts and then invest these funds in securities markets as they choose. The president believes that this will foster an ownership society, where everyone invests and takes responsibility for the future.

If these workers are as shrewd as Hetty Green or Warren E. Buffet, their investments might guarantee them a comfortable old age. But if they have no expertise or time to monitor the market, they will end up as desolate as the folks who bought Enron stock. Indeed, they might even fall below the poverty line, since the second element in the presidents design would be a substantial reduction in the benefits paid out by Social Security to these workers when they retire. This is high-stakes gambling without a safety net.

The reform would also hit the federal government with a tidal wave of red ink. Paying for the transition costs to the new system would require borrowing $2 trillion over the course of two decades. Because of the presidents tax cuts and the war in Iraq, Washington is already drowning in red ink. There is no guarantee that interest rates will remain low through the next couple of decades.

Four years ago, President Bush often praised compassionate conservatism. Nowadays, he promotes the ownership society. But the nation should not lose sight of that earlier ideal. There are millions of elderly citizens for whom Social Security supplies most or all of their income. A reform that heavily cuts the benefits of these poor might be called conservative; it would surely be called cruel. Nor should the Social Security safety net be shredded, lest unlucky future generations end up on the streets with a tin cup, like their predecessors in the 1930s.

Comments

exeneiche | 1/21/2008 - 1:30pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/21/2008 - 11:24am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/20/2008 - 6:46pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/20/2008 - 5:18pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/20/2008 - 4:09pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/18/2008 - 5:01pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/18/2008 - 8:51am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/18/2008 - 12:41am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/17/2008 - 8:38am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/17/2008 - 8:19am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/16/2008 - 11:30am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/3/2008 - 11:09pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/3/2008 - 2:18pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/3/2008 - 11:05am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 1/3/2008 - 9:56am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/21/2007 - 3:25am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/20/2007 - 9:36pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/20/2007 - 7:10am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/19/2007 - 10:36pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/19/2007 - 10:24pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/19/2007 - 5:11pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/17/2007 - 11:05am
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting! Look for some my links:
exeneiche | 12/7/2007 - 6:41pm
I’d prefer reading in my native language, because my knowledge of your languange is no so well. But it was interesting!
Terrence Waitrovich | 2/21/2005 - 1:08pm
Let there be no mistake. This fight over Social Security is our country's moral and social equivalent of the Battle of Hastings. Based on the outcome, there are two futures: One in which everyone in U.S. society takes part or one along the lines of certain Latin American countries with the rich living behind gated fences and the vast majority of the citizens lying at the gates hungry and ill like the Gospel's Lazarus. What future do we want for our country?

I am 55 years old. Can my generation say that it has improved society for those who follow us? I wonder! We were led into an unpopular and immoral war, and we have permitted today's leaders to do the same. Let us at least leave one aspect of the world as good as we were given it. Let us not permit the destrction of one of the cornerstones of the society bequeathed to us by the New Deal.

Rev. Leonard F Villa | 2/5/2005 - 8:30pm
By all means let's discuss the President's plan to reform social security. However, let the discussion proceed without scare-tactic rhetoric; false statments about what the President is proposing; and silliness like Senators hugging a statue of FDR.

The irony is FDR in setting up Social Security saw private accounts as part of it. He stated as a principle of SS: "...(V)oluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."

Consider also that under the President's plan, you, and not the government, get all the gains in your personal retirement account. The amount you receive from the government is not reduced if your personal account does well. The better your account does, the better off you are. Let the discussion begin.

Sandra Sandvoss | 2/4/2005 - 12:53pm
Thank you for addressing this important issue and for pointing out the dangers involved in "privatizing" Social Security accounts. The poorest workers, those who earn minimum wage sporadically throughout their lives, are also the least educated and the most likely to have no clue how to invest their money. These same workers have no opportunity to save, are barely able to survive on what they currently earn. They will also receive the lowest benefits when they do retire. Despite increased education and the creation of "high-tech", well-paying jobs, there are way too many people in this country who fit the picture I describe. THEY SHOULD NOT BE FORGOTTEN!
Matthew Shadle | 2/16/2007 - 1:14pm
America’s editors missed the boat in their editorial on Feb. 14 about Social Security. They point out that the transition costs will reach $2 trillion (it may be less), but they fail to mention how much Social Security would cost without change. Every year Social Security takes in more than it pays out, and this surplus is then loaned to other government agencies and spent. The annual surplus is decreasing, however, and in 2018 payouts will exceed tax revenues, and by 2042 the trust fund will be depleted. Because the money in the trust fund has been loaned out, however, it will have to be made up through increased taxes or government borrowing. By 2042 this will amount to over $5 trillion, and by 2080 it will reach over $26 trillion, which would certainly make $2 trillion to fix a broken system worth it.

Reducing benefits for future retirees would probably fix this problem, but young workers are already facing losses on their Social Security payments. On average they will receive about 90 cents for every dollar they pay in. To reduce their benefits further in order to make the program solvent would be entirely unjust.

The editors also make the claim that personal accounts would be too risky. The A.A.R.P. has led the charge that personal accounts are too risky, and yet it offers its own employees 401(k)’s, which are very similar to the personal accounts. Social Security employees themselves, along with other federal employees, take part in the Thrift Savings Plan, which is also similar to the personal accounts. America’s editors claim that workers would have to be “as shrewd as Hetty Green or Warren E. Buffet” for personal accounts to work, but this is simply elitism, if they mean that other workers are too stupid to do what millions of white-collar and federal workers already do.

Mildred Rahrig | 2/16/2007 - 12:59pm
The editorial on Social Security, “Not So Fast, Mr. President” (2/14) was good, but it did not go far enough. Mr. Bush assumes that because we senior citizens will be protected from benefit changes, we will have no objections to his private accounts. No one mentions that the people who will be hurt the greatest by a reduction of benefits are those in the age group 40 to 55.

These are our children, the same ones who also suffered from the outsourcing of jobs, who lost benefits because of buyouts, who are trying to put their own children through college. They will not be in the new system long enough to accumulate much money in private accounts.

I have two questions for Mr. Bush. Why has this been such an agenda item for you since before you even ran for president? And if this is such a good program, why is it necessary to travel all over the country, on taxpayers’ money, to sell it?

Terrence Waitrovich | 2/21/2005 - 1:08pm
Let there be no mistake. This fight over Social Security is our country's moral and social equivalent of the Battle of Hastings. Based on the outcome, there are two futures: One in which everyone in U.S. society takes part or one along the lines of certain Latin American countries with the rich living behind gated fences and the vast majority of the citizens lying at the gates hungry and ill like the Gospel's Lazarus. What future do we want for our country?

I am 55 years old. Can my generation say that it has improved society for those who follow us? I wonder! We were led into an unpopular and immoral war, and we have permitted today's leaders to do the same. Let us at least leave one aspect of the world as good as we were given it. Let us not permit the destrction of one of the cornerstones of the society bequeathed to us by the New Deal.

Rev. Leonard F Villa | 2/5/2005 - 8:30pm
By all means let's discuss the President's plan to reform social security. However, let the discussion proceed without scare-tactic rhetoric; false statments about what the President is proposing; and silliness like Senators hugging a statue of FDR.

The irony is FDR in setting up Social Security saw private accounts as part of it. He stated as a principle of SS: "...(V)oluntary contributory annuities by which individual initiative can increase the annual amounts received in old age. It is proposed that the federal government assume one-half of the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans."

Consider also that under the President's plan, you, and not the government, get all the gains in your personal retirement account. The amount you receive from the government is not reduced if your personal account does well. The better your account does, the better off you are. Let the discussion begin.

Sandra Sandvoss | 2/4/2005 - 12:53pm
Thank you for addressing this important issue and for pointing out the dangers involved in "privatizing" Social Security accounts. The poorest workers, those who earn minimum wage sporadically throughout their lives, are also the least educated and the most likely to have no clue how to invest their money. These same workers have no opportunity to save, are barely able to survive on what they currently earn. They will also receive the lowest benefits when they do retire. Despite increased education and the creation of "high-tech", well-paying jobs, there are way too many people in this country who fit the picture I describe. THEY SHOULD NOT BE FORGOTTEN!

Recently in Editorials