The Debate We Should Be Having on Social Security

A new AP-Ipsos poll shows that President Bush’s Social Security plan continues to lack majority support. There’s a good reason why. The White House is trying to address three separate issues with one big solution and it’s just not connecting. Here at TYL, we think the debate should really be broken down as follows:

1) Solvency. Privatization does nothing to solve the solvency problem. That will have to be addressed through tax increases, benefit cuts or, the most politically acceptable solution (according to the new poll), raising the $90,000 limit on earnings that can be taxed for Social Security. Or some combination of all three.

2) Private Accounts. Assuming we can keep guaranteed benefits at their current level, should some of our Social Security payments be placed in private accounts? Here’s the problem: it makes sense to force me to pay money to support the generations that came before—after all, they helped create this great country and shouldn’t live their retirement in poverty. But why should the government be allowed to force me to save my own money? If it’s my money, shouldn’t I get to save it or spend it as I see fit? Forced private accounts simply don’t make sense. So, the debate shouldn’t be about privatizing social security. It should be about whether we should create an optional retirement plan—something even better than the current IRAs. Say, an account that lets us save 1-4% of our yearly earnings completely tax-free. No taxes on the way in, no taxes on the way out.

3) The Future of Social Security. Do we as a society have an obligation to provide social security to wealthy retirees? There seems to be no real social imperative for my tax dollars to go into checks for upper middle class and upper class seniors. Means-testing benefits would be complex and, yes, it might be unpopular to pay poor seniors benefits that well-off seniors would be denied. But it would take only 20% of current Social Security payments to lift every impoverished senior out of poverty. Think how much money could potentially be saved if we changed our perceptions on the purpose of Social Security. We absolutely must consider whether we want to continue paying rich retirees benefits they simply don’t need.

Clearly, the issues that make up the Social Security debate are more complex than either Bush or the congressional Democrats want us to think. Currently, neither side has proposed a real plan. This is a debate that demands more of Bush than just some bold ideas and staged town hall meetings. And this demands more of Democrats than just stubborn ideology and the-sky-is-falling rhetoric.

The future we craft for Social Security says a lot about the future we want for our nation. Unfortunately, neither party seems able to muster the will or political strength to have the debate now. Our next chance could be years away. In the meantime, we should all keep thinking.

Some More Thoughts From:

• Mickey Kaus
• James Pinkerton.
• Dick Morris