New York Times
February 5, 2005
Liberals are making a historic mistake by lining up so adamantly against Social Security reform.
It's impolite to say so in a blue state, but President Bush has a point: there is a genuine problem with paying for Social Security, even if it isn't as dire as Mr. Bush suggests.
As Bill Clinton declared in 1998 about Social Security reform: "We all know a demographic crisis is looming. ... If we act now it will be easier and less painful than if we wait until later." Mr. Clinton then made Social Security reform a central theme of his 1999 State of the Union address, saying, "Above all, we must save Social Security for the 21st century."
Figures tossed about these days - such as the system's having to slash benefits in 2042 - are wild guesses that depend in part on longevity. The Social Security Administration estimates that U.S. life expectancy will increase by only six years by 2075. But life spans grew by 30 years in the 20th century, and if you believe (as I do) that biotechnology will greatly raise life expectancy, then we'll face a huge problem paying for long-lived retirees (touch wood, like me).
Mr. Bush is also right to try to promote savings - though financing a savings plan by borrowing is a lousy idea. A crucial economic weakness of America is its low savings rate, and one way to address that would be to finance retirements more out of savings - with wealth creation rather than wealth transfers.
Singapore helped pioneer private investment accounts (a good rule of thumb in economic policy is to do what Singapore does), and its system has raised home ownership and alleviated poverty.
Democratic senators in the 1990's like Charles Robb, Bob Kerrey, John Breaux and Daniel Patrick Moynihan championed Social Security reform. After Senator Moynihan offered a reform proposal in 1998, The Washington Post noted, "Republicans want to put Social Security reform on the back burner." But now that Republicans want it on the front burner, Democrats are screaming foul.
One objection has been that Mr. Bush will use his reform as another occasion to soak the poor. But that's a reason for Democrats to participate and suggest progressive alternatives.
Policy wonks have shown a variety of ways to organize retirement accounts so the poor are better off. "Our goal should be to eliminate poverty among the elderly" - through progressive Social Security reforms - Mr. Kerrey said. For example, Mr. Clinton favored private accounts as add-ons to Social Security, with the government matching contributions by low-income Americans.
True, there is one powerful objection to private Social Security accounts: We can't afford them now. Mr. Bush's plan would cost $1 trillion in its first decade and $3.5 trillion more in its second decade. Financing this with debt - an Argentinian approach - would be utterly reckless.
It shouldn't be liberal to oppose wealth-creating savings programs for workers. And it shouldn't be conservative to use loans to launch a multitrillion-dollar program.
But what if we paid for Social Security reform by keeping the inheritance tax? Or by undoing Mr. Bush's tax cuts for the wealthiest Americans? Rescuing Social Security strikes me as a good use for that money - while paying for it with debt would not secure our children's future, but mortgage it.
If it hadn't been for the Monica Lewinsky affair, Mr. Clinton might have achieved Social Security reform. But that didn't happen, and these days both parties are behaving irresponsibly. Mr. Bush is disingenuous - and perhaps fiscally reckless - by refusing to explain who will pay the bill, and the Democrats are trying to shout him down without offering solutions of their own.
As Will Marshall, a founder of the Democratic Leadership Council and now president of the Progressive Policy Institute, said: "The Democratic Party ought to be developing a vision of a modernized social insurance system for the 21st century and moving beyond the 'just say no' position. If Bush is wrong, then what is right?"
Bill Clinton was correct that there is a real problem out there. And I'm deeply afraid that we're going to go through this debate as we did the health care battle of 1994 - by rejecting a White House proposal but agreeing on nothing in its place.
In that case, it won't just be Mr. Bush who loses. We'll all lose.