- The Washington Times - Monday, December 6, 2004

While virtually everyone understands the global nature of terrorism, few people recognize that many of the long-term economic problems our country faces also are global. None is greater than the crushing economic pressures the industrial world’s retirement and health-care systems — Social Security and Medicare in the U.S. — face in the decades ahead.

So it’s encouraging that President Bush plans to make Social Security reform one of the centerpieces of his second term, part of the larger vision he discussed during the campaign to create an “ownership society” in America.

As the distinguished economist Anna Schwartz told a group of graduate fellows at the American Institute for Economic Research (AIER) in Great Barrington, Mass., this summer, the United States is not alone. Virtually all Western governments will face “immense financial burdens … during the coming half-century if they honor their future unfunded commitments to pay generous pensions and health-care expenses for aging populations,” she said.

Their antiquated “pay-as-you-go” systems, she told the AIER economic fellows, are “hostage to the ratio of the working population to the retired population.” As a result, the United States and other Western countries face “a declining proportion of working-age people and a rising proportion of older people.” Over time, the taxes paid by workers will be insufficient to finance the benefits promised to retirees. Then what happens?

Interestingly, while U.S. politicians continue wringing their hands, political leaders in other countries already have moved ahead with needed reforms.

Indeed, while the Social Security ownership ideas promoted by the Bush White House have been criticized as “way out” by some Americans, they are old hat elsewhere and may be the way out of our current dilemma.

According to my associates Jim Martin and Hugh Newton at the 60 Plus Association, more than three dozen countries — including Australia, Chile, Great Britain and Mexico — already have reformed their national pension systems along the lines promoted by the White House. Even Russia — a relatively recent convert to the free market — is considering pension reforms that would include individual ownership of private retirement-savings accounts.

Sen. John Kerry, President Bush’s Democratic challenger, argued during the campaign against the partial “privatization” of Social Security, and he is certainly entitled to his opinion. Mr. Kerry, like other defenders of the status quo, apparently believes Social Security’s financial collapse can be forestalled with some creative tweaking here and there. But the demographic evidence the industrial world leaders confront argues for more substantive reforms.

As The Washington Post explained this summer in an editorial published the day after Social Security system’s 69th anniversary, under the type of reform plan favored by the White House, “The government would forgo some revenue from payroll taxes, which would instead be diverted into private savings accounts. These accounts would be allowed to hold equities, which would generate an investment return; this would unlock a new source on money to finance Social Security.

“If bundled together with modest benefit cuts, privatization could contain the projected growth in Social Security costs” and stabilize and save the system. Privatization, The Post observed, also could stimulate economic growth, boost tax revenues and strengthen the country’s fiscal prospects.

It wasn’t so long ago that discussing Social Security reform during a presidential election would have been the kiss of death for a candidate. This year it helped carry Mr. Bush to victory.

In the spirit of bipartisanship, maybe Mr. Kerry will reconsider his position and join the president in the historic effort to modernize this New Deal program.

Research shows the United States could transition to a system of personal retirement accounts without threatening the benefits of today’s seniors and the soon-to-retire Baby Boomers. Rather than accumulating promises the government can not keep, younger workers would accumulate stocks and bonds and other financial assets in their Social Security retirement accounts. Because they would own these assets, they would have a personal stake in the future of America.

That’s what President Bush’s vision is all about. Giving people more control over their financial destinies.

Pat Boone, singer and entertainer, is national spokesperson for the 60 Plus Association, a nonpartisan senior citizen group of more than 4½ million members and supporters.

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