The Only Thing We Have to Fear

It has become increasingly clear that there will be a battle over Social Security, and someone is going to lose. President George W. Bush and his supporters want to partially privatize Social Security, while most Democrats and some Republicans oppose the president’s misguided plan. Each day, newspapers report on the ebb and flow of the war of words, pundits bickering and economists continuing to snipe at the president’s innumerate advisors. But amidst it all, the confusion and manipulation of Social Security’s facts and figures—present and projected—continue to obscure an optimal path for the ailing social program. Soon, however, this fruitless discourse will come to an end as Bush pushes Congress to consider his plan for Social Security. Without a clear alternative to the president’s proposal—which the Democrats have yet to provide—our worst fear is that some well-meaning but badly misinformed Congressmen might support the Bush-backed bill, and thus slowly destroy Social Security as we know it.

The facts are these: Using prudently low estimates of growth, Social Security will gradually stop taking in more money than it pays out, and eventually Social Security’s immense reserves will run out. The exact dates depend on the growth numbers one uses, but Bush likes to say that by 2042, Social Security will be “exhausted and bankrupt.” Bush has somehow connected this anthropomorphized Social Security (government programs cannot file for bankruptcy, nor become exhausted) to the idea that when America adjusts Social Security’s cash flow, part of Social Security should also be privatized. The plan’s publicized, if vaguely defined, line is that anyone could divert a small part of his Social Security taxes to a private account invested in “a conservative mix of bond and stock funds.” Commentators say the plan is logically analogous to the government offering to loan you money against your future Social Security payments to invest in the market.

The problem is twofold. On the one hand, Bush and his supporters are riling up fears about the end of Social Security in order to create interest in their own plan, and yet they cannot justify the linkage between the issues. In his recent State of the Union address, Bush meticulously avoided stating that privatization would fix Social Security’s problems. So why privatize in the first place? On the other hand, this entire debate is founded on certain economic and demographic predictions—low birthrates, low immigration and in particular low growth—while Bush’s plan predicts robust gains in the stock market. Normally, one expects financial markets and economies to function similarly over long periods. A sluggish economy should, over the course of 50 years, correspond to a sluggish stock market. The best explanation that anyone has mustered for this is that the rest of the world will flourish, while America lags, but there is no coherent argument for how this trend could justify Bush’s numbers.

We think that a constructive solution should not, and need not, rely on privatization. President Bush said that Social Security is a “symbol of the trust between generations,” and in this we agree with him. Social Security maintains absolute trust because Americans know that only collectively can we guarantee that working America will not starve in its senescence. Social Security certainly needs to fix its balance sheets, but there are many ways to achieve this. Benefits could be reallocated, the tax burden of Social Security could be shifted, or the age at which benefits commence could be changed. These are all feasible options, and Democrats need to show Americans how many possible plans could keep the elderly secure in the latter half of the century.

As we have stated previously on this page, we support raising the Social Security age; this seems a sensible reaction to the demographic changes that have threatened Social Security in the first place, and one that could over a very long time keep the program in a fiscal equilibrium without drastically changing the situation of retired or non-retired individuals. But whether or not a new proposal suggests raising the retirement age, the Democrats simply must put forth a well-articulated, feasible plan to combat the temptation to passively accept Bush’s untenable privatization scheme.

Some Republicans seem to be treating the debate over Social Security as though it were a matter of principle. It is a matter of lives. But if privatizers continue to throw around figures like ineptly-aimed darts, they will continue to present confusing and conflicting assessments of the Social Security problem. Yet, if the Democrats and their supporters do not step up to challenge them, Congress will likely end up advocating ruinous policies that will, decades hence, leave some Americans without the guaranteed income which Social Security would have furnished. We sympathize with the desire that all Americans own equity, but no program with that aim should ever come at the cost of an anemic Social Security.