Tales from the 'trust fund'

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Judging by the horror stories that John Kerry is telling about Social Security reform, Halloween started a little early at the Kerry campaign.

Remember that old cable television program, "Tales from the Crypt"? In his new campaign advertisement "January Surprise," the Massachusetts senator follows in its tradition by weaving a chilling narrative about President Bush's bold proposal for Personal Retirement Accounts (PRAs). It's an effort to mask the fact that Mr. Kerry has no plan of his own. And like the classic television show, this latest Kerry ad is pure fiction.

Mr. Kerry asserts that there's enough money in the Social Security Trust Fund to pay full benefits for the next 40 years, but like the demented Crypt Keeper he is presiding over an empty grave. The Social Security Trust Fund is full of meaningless government IOUs -- there are no real assets and we do not have 40 years to fix the problem. Social Security will run into the red in just 2018 as benefits paid exceed contributions to the system. If the program is not reformed soon, Congress will have to dramatically increase payroll taxes and cut benefits.

That's why Mr. Bush's PRA plan is the only solution that will save Social Security without increasing taxes or cutting benefits. PRAs will allow workers to devote a portion of their payroll taxes into personal accounts that they own and control. Similar to 401(k)s, PRAs will grow with the economy and provide each worker with the security of real assets in a nest egg. Mr. Kerry, instead of embracing PRAs or presenting his own alternative solution, has resorted to cheap, deceitful scare tactics. Here's the truth behind some of Kerry's Social Security urban legends:

Myth No. 1. PRAs will "privatize" Social Security. Personal Retirement Account plans do not "do away with" or "privatize" Social Security. Contributions in the form of payroll taxes will still be mandatory. While PRAs will be owned and controlled by individual workers, the government will still manage the overall program to prevent fraud and ensure security. In fact, a similar model already exists in the form of the successful Thrift Savings Plans that federal workers now enjoy. And, of course, current retirees, those near retirement and those receiving disability payments will still receive benefits as promised.

It is interesting that many who adamantly oppose personal retirement accounts already have their personal pensions in the stock market. Members of Congress and other federal workers can invest in private markets.

Mr. Kerry never fails to point out that "ordinary people" should have the same health care options as politicians. So why doesn't Mr. Kerry also support creating retirement savings options for ordinary people similar to those that politicians already enjoy?

Myth No. 2. PRAs will "cut benefits by 30 to 40 percent."

This is complete fiction. The truth is that PRAs will actually provide workers with greater benefits than the current system. After all, which would you rather have: a personal account that you can own and control and can pass on to your children, or an empty promise from Congress? In fact, Social Security program actuaries analyzed one PRA bill currently in Congress and found that it would increase benefits by 130 percent.

No doubt, it is the current system that shortchanges taxpayers: Workers retiring today can expect a measly rate of return of only 2 percent on their payroll taxes, compared with the 4.6 percent return in the market, as calculated by the Cato Institute. And regardless of Mr. Kerry's characterization of Social Security reform as "risky," market investment is safe over long periods of time -- even a worker retiring in the Great Depression would have had an average return of 4 percent had PRAs existed.

The real risk lies in sticking with the current system and doing nothing, as Mr. Kerry suggests. Social Security runs dry in just 14 years, and the program will face staggering benefit cuts and new taxes, further eroding the return on investment for American workers and retirees.

Myth No. 3. PRAs "would cost $2 trillion over 10 years." Mr. Kerry's campaign terror tale ignores reality. Social Security actually represents a massive unfunded liability on the order of $10.4 trillion. Therefore, Social Security reform will "cost" approximately $10.4 trillion no matter what we do. The question is how we solve the problem. In the near future, taxpayers will be stuck with this bill. Setting aside real assets in PRAs to deal with this enormous liability is not a taxpayer "cost": It's actually prudent, responsible public policy. If we do nothing, as Mr. Kerry suggests, the current Social Security system will begin running perpetual deficits in 2018 totaling nearly $1.8 trillion in new debt by 2028 alone. We can do better.

Mr. Kerry and the far left have told enough frightening tales about Social Security reform to fill a Stephen King novel, but they have yet to propose a solution to the crisis. While fictional ghost stories can be entertaining this time of year, Social Security reform is the most important non-defense issue facing Americans today. Mr. Kerry needs to stop his wildly irresponsible scare tactics and present a plan of his own to save Social Security.

Former House Majority Leader Dick Armey is co-chairman of FreedomWorks, a grassroots organization dedicated to lower taxes, less government and more freedom for all.