- The Washington Times - Sunday, July 28, 2002

Mark Twain, among others, is credited with noting there are three kinds of lies lies, damned lies and statistics. How odd that America's foremost satirist of the 19th-century should so aptly describe the problems with Social Security reform in the 21st.
But Twain was no stranger to politics. As personal friend and confidant of many politicians, including President U.S. Grant, Twain knew how easily the most fundamental numbers could be twisted, pulled and turned, even if he knew nothing about entitlement programs.
Lies. Opponents of reform, for example, often portray Social Security as a government compact you pay taxes while working so you will receive benefits when you retire. But Social Security is a compact only by congressional entitlement.
The money you pay today in FICA taxes pays benefits to today's retirees. Social Security is a "pay-as-you-go" system. There is no link to your retirement or any future benefits. Those who are working when you retire will pay taxes to fund your benefits.
Damned lies. Former Sen, Daniel Patrick Moynihan, New York Democrat, was recently asked by NCPA President John Goodman why Democrats demagogue the issue of Social Security reform. Mr. Moynihan blithely replied, "Because it has always worked so well."
There are several manifestations of the damned lie in reforming Social Security.
The one most often used is that anyone wanting to reform Social Security will cut benefits. This damned lie thrives, especially among seniors, even though every serious proposal ensures that benefits of the retired and nearly retired will not be touched.
Statistics. Another damned lie is calling a partial shift of obligation for benefits a cut. For example, if someone interested in reforming Social Security says some of the inevitable increase in benefits over the years could be replaced by personal retirement accounts, demagogues rise and yell in unison, "Cut." Again, no one has ever seriously proposed a cut in total benefits.
Most proponents of Social Security reform want to replace some benefits with personal retirement accounts (PRAs). Despite evidence that PRAs are working in 19 countries and soon may be adopted in Russia and China, those who support the current Social Security system say PRAs don't add up. Let's do the math.
Doing the math: Tom Saving, a trustee of the Social Security and Medicare trust fund, professor of economics at Texas A&M; and an NCPA senior fellow, points out that the arithmetic of retirement security is simple:
(1) Tomorrow's elderly population will be larger than today's because of the number of Baby Boomers who soon will retire.
(2) Retirees have been promised benefits that surpass those of generations before them.
(3) There is no money dedicated to funding Social Security benefits except FICA taxes collected from current workers.
Any kid who makes change at the local supermarket can do the math the system is going broke. Without reform, the "go broke" date is 2017 15 years away. If you remember 1987, that's the same span of time. After 2017, expenses (benefits) will run away from revenues (taxes).
How will future generations deal with the gap between Social Security benefits and FICA taxes? Cut benefits, maybe, although no one has ever seriously proposed that.
There is another solution. Do nothing, which really means raise FICA taxes. If it doesn't bother you to pay from one-third to one-half of your income in FICA taxes to finance a growing list of retirees with a burgeoning menu of benefits, OK. But most Americans won't do that. Another argument is that PRAs weaken the Social Security system. But that's inductive reasoning. PRAs aren't what's weak; it's the Social Security system that is going broke.
So we can choose to reform the Social Security system, or not. Not reforming the system and having to raise FICA taxes to astronomical levels doesn't add up.
The only method that adds up to a solvent, long-term solution is PRAs. It isn't the pay-as-you-go system that we're accustomed to, but at least when you pay, you get to have money to retire on. You also get other neat benefits, like ownership, control over your retirement and choice in how to fund it.

Pete du Pont, former governor of Delaware, is policy chairman of the National Center for Policy Analysis.


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