Wednesday, April 06, 2005

What About Social Security?

With the recent death of the Pope, public discourse has shifted away from the President's signature issue for 2005, Social Security Reform. I am amazed that there isn't more political courage with respect to this issue. Contrary to the prevailing conventional wisdom, I have faith in my parents' generation. They want what's best for their children and grandchildren. However, there is significant confusion over the proposed reform options. Our leaders in Congress, the advocacy groups, and the media are not doing us any favors. Honest discussions are clouded by ideological and political calculations. Quite frankly, we cannot make a rational decision without agreeing on the particulars and scope of the problem.

The reality is that there will come a day where we will be forced into draconian measures unless we objectively look at the facts today and develop and implement sound solutions. Personally, I like the idea of ownership and personal accounts with restrictions. More individuals with a stake in the US economy is a good thing. It broadens the political base with an interest in economic policy. Further, it actually makes sense. Most of us have 401(k)s or other assets that we own. We know from empirical evidence that, on balance, an investment in the US economy is a sound retirement strategy. The rest of the world obviously agrees with that assessment. What is the Left so afraid of? That personal accounts will actually succeed, thereby creating a new class of investors beholden to the memory of George W. Bush and the Republicans? Are they concerned that the transition costs will divert money from some of their pet programs? Do they not realize that the transition costs of today are in reality a discounted payment on the costs for future generations?

In addition to personal accounts, I am willing to consider adjustments to the retirement age, calculation of future benefits (inflation vs. wage growth), and progressivity in benefits based on income and wealth. This article by Robert Samuelson discusses the issue in more detail.

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