The deceptions add up on Social Security
By Thomas Oliphant, Globe Columnist | December 19, 2004
WASHINGTON
FOUR YEARS ago, the commission on Social Security that Richard Parsons was co-chairing for President Bush warned with a bit too much hype that "the promise of Social Security to future retirees cannot be met without eventual resort to benefit cuts, tax increases, or massive borrowing."
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Speaking for himself, the Time Warner executive said simply that "there is no pain-free way and no quick way" to deal with a problem of this size and complexity.
Last week, however, Parsons put aside his once-balanced view of Social Security to serve as a prop for Bush's stink bomb of a conference to promote his "vision" for second-term economic policy. This time around, the word was that the White House wanted stark portrayals of impending crisis, not comprehensive ideas for solution.
This time around, Parsons was on message, calling the status quo that collects payroll taxes to pay current benefits impossible to maintain as the ratio of taxpaying workers to check-cashing retirees continues to narrow.
Another member of that commission, co-chaired by the late Senator Daniel Patrick Moynihan, did a similar disservice to the serious debate he knows the country needs to have about Social Security. He is former Democratic congressman Tim Penny of Minnesota, a prominent deficit hawk from the 1980s.
Earlier this year, he noted in an essay that the government blew a chance to put the retirement and disability system on a sound footing by turning healthy government operating budget surpluses into massive deficits and by embezzling large Social Security operating surpluses to help cover that fiscal hemorrhage in the form of special Treasury bonds.
Of the eventual cost of redeeming trillions in intra-government paper, Penny said that "the only way" to meet the obligation is to raise taxes, cut other government programs or borrow on a historic scale.
Penny also said that benefits ultimately will have to be cut for future retirees, emphasizing the commission's suggestion of the use of inflation only to adjust benefits upward, not the wage base of workers. And while he is a strong supporter of personal investment accounts for those who desire them, he was responsibly aware that the huge costs involved must be confronted.
"Critics will rightly argue," he wrote, "that creating voluntary personal accounts for younger workers will be a fiscal challenge, given the already costly obligation of supporting baby boom retirees."
Last week, however, Penny followed the White House desire to stick to a propaganda line emphasizing impending crisis and the need for quick action.
In contrast to his usually textured comments, he said simply that the present system is "unsustainable" and that expected Social Security revenues 35 years from now will be 25 percent short of benefit obligations under current law.
The ultimate in deception, however, was President Bush himself. Sitting in on the Social Security discussion and sounding like he was still on the reelection campaign trail, Bush claimed that his "reform" proposal will be built on three principles -- no benefits cuts for people in or near retirement, no increase in payroll taxes, and the creation of the personal investment accounts.
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Those principles, in fact, do not come within a country mile of putting the system on anything approaching a sound basis. Bush's own White House acknowledges all the time that the relationship between these investment accounts and the system's long-term financial challenge is zero.
The truth remains that however one defines the problem -- starkly or calmly, as a grave crisis or a manageable problem -- the solution remains taxes, benefits, and/or borrowing. If the government borrows up to $2 trillion to finance a transition to investment accounts (Bush's reported, current leaning), the result will simply be to raise a pile of money from the private world only to turn around and send it back, minus a healthy cut for his pals on Wall Street who will get to manage all this new business.
For the individual, the result will be a gamble that the accounts will grow enough over time to compensate for the benefit cuts that will occur in the future.
There is an analogy here with the investment accounts businesses have set up over the last generation to replace the so-called defined benefit pension. Last time I checked, the average balance in the most widely used of these vehicles -- 401(k) plans -- was a mere $51,000. I don't know about you, but I'm glad I have a real pension coming as well as a guaranteed Social Security check when I stop working.
President Bush has been doing a generally lousy job getting ready for his second term, and last week's conference was an illustration of his problem. The reelection campaign's focus on poll-driven palaver does not work very well when applied to the serious business of governing.
I have no doubt that after last week's meek compliance with the White House message meisters, people like Dick Parsons and Tim Penny will resume their responsible, comprehensive discussion of Social Security. If the president doesn't follow them, and soon, his effort at "reform" will flop and will deserve its fate.
Thomas Oliphant's e-mail address is oliphant@globe.com. |
