Text 7859, 129 rader
Skriven 2005-01-23 09:07:00 av Jeff Binkley (1:226/600)
Ärende: Social Security
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Fact and Comment Steve Forbes, 01.31.05, 12:00 AM ET

Leading With Their Chins If Bush Administrations officials had decided 
to deliberately sabotage prospects for the positive, dramatic and 
favorable economic-growth reform of our ailing Social Security system, 
they couldn't have done a better job than they did recently in floating 
trial balloons about slashing future Social Security benefits. It's no 
surprise that big-spending, high-taxing liberals are having a field day: 
"We told you so--those dastardly Republicans want to cut your payments 
and, at the same time, enrich their Wall Street buddies by privatizing 
Social Security!" It's also no surprise that even some Republicans are 
now talking about the need to increase taxes to finance the transition 
to a fractionally privatized new system. The Administration has put in 
train the worst of both worlds: taking away future benefits and hiking 
taxes. And for what? Maybe a puny, partial privatization wherein 
personal account assets will remain small and thereby vulnerable to 
future counterattacks. 

Bluntly put, all this is idiotic. We can robustly reform Social Security 
without tampering with promised benefits. In fact, the right reform 
would not only increase future payments for those who take part in a new 
privatized program but also guarantee that participants in the new 
system would, at a minimum, receive at retirement what they would have 
received with the current system. 

The Right Stuff

One such approach, introduced last summer, is the Ryan-Sununu bill. 
Currently the Social Security tax is 12.4%, applicable on the first 
$90,000 of income. The Administration is toying with the idea of 
permitting people to have up to 4 percentage points of that payroll tax 
go into personal accounts. Representative Paul Ryan (R-Wis.) asks why so 
little? If you're going to enact reforms, make them meaningful from the 
get-go. Under Ryan's proposal workers would be able to shift to their 
personal accounts 10 percentage points of the current 12.4% Social 
Security payroll tax on the first $10,000 of wages each year ($1,000) 
and 5 percentage points on all taxable wages above that. People could 
put up to $5,000 a year into their personal accounts. This would come to 
an average contribution of 6.4 percentage points among all workers. 
Participants would choose from a variety of well-diversified mutual 
funds. Those mutual funds would be regulated for safety and soundness, 
as would the investment firms managing them. You'd never be allowed to 
put all your money into faraway gold mines or a "hot" company or two. 
The Ryan-Sununu bill's model is the federal Thrift Savings Plan used by 
millions who work for the federal government. This plan, by the way, has 
always outpaced the return one gets for Social Security. 

The Ryan-Sununu approach would turn a deadweight, pay-as-you-go 
liability system into an enormous generator of capital that would 
significantly increase economic growth in the years ahead--and give 
participants far more in retirement payment and leave them a real nest 
egg of capital. Those who stayed with the current system would receive 
their promised benefits. 

Bonds necessary to finance the transition would eventually be amortized, 
and Social Security's unfunded liabilities--now more than $10 trillion--
would be eliminated entirely. In fact, in the decades ahead that 12.4% 
payroll tax could be cutsignificantly. People who went into the new 
system would receive traditional Social Security benefits based on the 
past taxes they'd already paid into the program. The new system would be 
completely voluntary. 

These are not pie-in-the-sky numbers. The Ryan-Sununu plan has been 
scored by the chief actuary of Social Security. The official reckoning 
shows that by 2019 workers would accumulate some $7 trillion in today's 
dollars in their accounts. That's equivalent to the entire national debt 
today. For the first time in history low-income earners would accumulate 
real liquid capital. The actuary found that the accounts would provide 
substantially better benefits than today's system does. 

The Institute for Policy Innovation released a study in 2003 that showed 
that a Ryan-Sununu-style personal account, if split between corporate 
bonds and equities, would yield roughly two-thirds more in benefits than 
Social Security promises. Folks who put two-thirds of their money into 
stocks would get more than twice what Social Security promises in 
benefits. 

Transition costs? Start by using the short-term Social Security 
surpluses that are projected to last until 2018. Use additional 
government revenues, especially those from the extra corporate taxes 
that result from the extra growth the accounts would provide. A little 
bit of spending restraint would also help. Spending grew an average of 
2.6% under Bill Clinton. It's been far higher under Bush but is now 
trending down. Thus, 3.6% would do the trick. And issue new Treasury 
bonds after 2018. The amount would be far less than the system's current 
unfunded liabilities. In addition the bonds would be paid off in the 
future from the new system's eventual surpluses. 

Timid Soul 

So why is the White House descending into its current root-canal, zero-
sum mentality regarding future benefits? For several reasons. While 
Social Security actuaries score the Ryan-Sununu plan well, the 
Congressional Budget Office will not. CBO assumes that the new accounts 
will earn significantly less than bonds and stocks have earned 
historically. They grossly underestimate the growth that would come from 
such a positive reform. Remember, this is the agency that in the past 
has routinely tried to torpedo Ronald Reagan-like tax cuts because of 
their alleged costs. 

Let's take the worst-case scenario. Assume that over the next 40 years 
the government had to issue, say, $5 trillion worth of bonds. Even if 
those bonds were issued all at once--today--the resultant national debt 
proportionately would be about where it was at the end of World War II, 
when long-term Treasury bonds yielded less than 3%. Remember that today 
the U.S. economy has assets of $80 trillion. By the time the last bonds 
were issued, those assets would exceed more than $200 trillion in 
today's dollars. 

Seen from that perspective, future bond issues could easily be financed 
with the wealth of this economy. And the markets would do it because 
these personal accounts would be generating capital and greater economic 
growth. In short, from a balance sheet perspective, bond-issuing is a no-
brainer. 

The White House also fears that Alan Greenspan, who headed a Social 
Security reform committee that in the early 1980s--you guessed it--
raised taxes and the retirement age, may cripple reform efforts by 
saying that the private markets would "choke" on those bonds. But given 
the eventual paydown of these bonds and the wealth of America, such 
fears are groundless. 

President Bush should take as his example Ronald Reagan, who more than 
once went directly to the people to sell major policy initiatives that 
weren't liked by Washington insiders. If he doesn't, then we'll end up 
with little reform and higher taxes--and a weaker economy to boot.

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