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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Palau who wrote (673971)	3/3/2005 7:10:40 PM
From: Hope Praytochange	Read Replies (2) \| Respond to of 769670

The Ownership Card The best argument for Social Security reform has hardly been tried. Thursday, March 3, 2005 12:01 a.m. No one ever said reforming Social Security would be easy, certainly not President Bush. But even he may be frustrated at how difficult the effort is proving to be, what with the Democratic leadership and AARP refusing even to discuss personal accounts, the media spreading anxiety, and some Republicans on Capitol Hill searching for the political exits. The White House is pledging renewed efforts, but in order to succeed it is going to have to change its sales pitch. Part of the problem is that Mr. Bush and his spokesmen have been promoting reform more as a kind of national forced march than as a great new opportunity for individuals to build and control their own retirement nest eggs. Donning their green eyeshades in the traditional GOP fashion, they've talked about Social Security "solvency," "transition costs," "trust funds" and other accounting abstractions, all in all giving reform the appeal of Marine boot camp without the expensive haircut. "Do your fiscal pushups" will never be enough to transcend the fear-and-loathing thrown up by opponents. The only political trump that reformers have, and the one the White House has to make its main theme, is ownership. Not just an "ownership society," in the good phrase Mr. Bush often uses, but ownership of your own payroll taxes to build your own retirement assets. This is the nub of the entire reform debate, because it gets to the fundamental issue of who controls the money that Americans pay into the Social Security system. As it stands, millions of Americans still believe in the fiction that their payroll taxes are being squirreled away in a savings account in their name somewhere in the U.S. Treasury. This is largely because politicians of both parties have spread this fantasy over the years, the better to be able to continue to spend that loot themselves to buy votes for the next election. The undeniable truth is that Mr. Bush's reform is the only idea on the table that would create such accounts, complete with ownership rights written into law. Americans need to understand that as of now they have no such property right. While politicians have made promises to pay future benefits at gradually rising levels, the Supreme Court's 1960 Fleming v. Nestor decision makes clear that such promises are not an individual asset and that the taxes people pay today guarantee nothing at all down the road. Meantime, tens of billions of dollars of payroll taxes in excess of current Social Security benefits continue to flow into the Treasury each year, only to be spent today on other things by the same politicians who claim that personal accounts are a "risky scheme." As if putting one's trust in politicians wasn't the riskiest scheme imaginable. As Federal Reserve Chairman Alan Greenspan told Congress yesterday in his most vigorous support yet for personal Social Security accounts, one of their virtues "is that money allocated to the personal accounts would no longer be available to fund other government activities." He added that "if existing promises need to changed, those changes should be made sooner rather than later." In other words, the longer Congress waits to reform Social Security, the more likely it is that the politicians will repudiate their benefit promises. Another potent ownership theme is the right to pass savings on to one's heirs in a way that workers now cannot. An unmarried American who has worked for 40 years but dies tomorrow at age 60 will lose every dime of payroll tax he has paid over his entire career. A non-working spouse would receive a portion of her late husband's Social Security benefits, but if she dies early their children get nothing. With a personal account, a parent's payroll tax contributions would become part of an estate and could be passed along to children. Related to this ownership issue is how large these personal accounts are going to be. The Administration's proposal to limit the accounts to no more than four percentage points of the 12.4% payroll levy strikes us as too miserly. Senate Finance Committee Chairman Chuck Grassley is even more ungenerous, talking about two-percentage points or less. Lower-wage workers in particular need to be offered the financial attraction of larger accounts, which would allow them to build up assets more quickly and in a way that won't seem trivial. They also need to feel their accounts will be large enough not to be eaten up by administrative expenses. The main political point is that Americans aren't going to overcome their normal skepticism toward change unless they come to believe that they themselves will be able to build large personal nest eggs. The larger the accounts, the better. Only 30 days from the State of the Union address is too soon for Republicans to abandon the President's top second-term priority. But our sense so far is that many Americans are getting lost in the debate over federal accounting and solvency details. Reformers need to make clear that the main issue is who will own the payroll taxes that workers contribute to Social Security: The workers themselves, or politicians.