- The Washington Times - Wednesday, September 1, 2004

As the Republican National Convention approaches, both presidential candidates have been hitting the campaign trail, rolling out their respective platforms. The Democratic National Convention and recent speeches from President Bush have given us some insight into their views concerning what is sure to be a major issue come November — Social Security, a federal program facing looming financial instability.

In a recent “Ask the President” campaign stop in Virginia, Mr. Bush elaborated on his 2004 State of the Union theme of creating an ownership society. He argues that personal retirement accounts would allow workers to build a nest egg and earn much greater rates of return than Social Security currently provides. In fact, personal accounts would allow workers to receive around 60 percent more in benefits than is presently offered by Social Security. The president would allow workers to pass on this retirement nest egg to “whomever they wish” after their death. Mr. Bush added that Social Security, from a fiscal perspective, is impossible to maintain under its present structure without raising taxes.

By creating a system of personal accounts that workers can voluntary opt into, the federal government can ensure that full Social Security benefits will be provided to younger workers, without another round of payroll tax increases or benefit reductions. Clearly, Mr. Bush has a vision of how to transform the system into one that is permanently solvent. Recent polling data clearly demonstrates that personal retirement accounts are a winning issue. The president must push the idea further if he wants to bolster his re-election hopes.

Mr. Kerry’s vague statement at the convention left many Americans wondering what he actually plans to do with the program. Mr. Kerry simply stated that “as president, I will not privatize Social Security. I will not cut benefits.” Combined with his previous statements during the presidential debates in Iowa alleging the system will only need “minor changes,” Mr. Kerry seems to have boxed himself into a corner from which it will prove hard to emerge. Since he also has ruled out extending the retirement age during the same debate, the Democratic presidential candidate has little room left to maneuver to save a system that simply cannot survive.

As it stands today, Social Security faces a $12.7 trillion unfunded liability. To put this in perspective, the present unfunded liability of Social Security is three times the current national debt. Because John Kerry adamantly has opposed a move to personal retirement accounts, opposed benefit cuts and now refuses to raise the retirement age, he only has a few options left, such as increasing taxes, increasing the national debt or doing nothing.

The first option would force payroll taxes to skyrocket to nearly 20 percent. The second option is incompatible with Mr. Kerry’s goal: to halve the deficit during his term in office, provide universal health care, increase educational spending, fund alternative energy research, etc. Option three is reckless, considering the perpetual shortfall in payroll tax receipts beginning in 2018.

Even a class-warfare strategy of reducing benefits for those who earn more than $200,000 per year would do little to save the current program. As Harvard economist Martin Feldstein recently pointed out, if an 80 percent cut in benefits is imposed on this group, Social Security’s future shortfall would be lessened by only 5 percent.

Mr. Bush has laid out some broad themes for the general idea of personal accounts, but he needs to ensure that no one is left behind in any proposal he ultimately advocates. Personal retirement accounts must be large enough to provide a sound retirement and guarantee at a minimum the level of benefits promised to retirees under current law. Benefits must not be cut for seniors or for those near retirement through an increase in the retirement age, means testing or any other mechanism. And the president must not resort to a tax increase to “fix” Social Security as the federal government has done in the past.

Large personal accounts are the only option if we intend to save the benefits of future retirees across all generations without resorting to significant tax increases or drastic cuts in benefits. New demographic realities require modernization of the Social Security program that was created nearly 70 years ago.

Mr. Kerry has yet to provide any ideas or leadership regarding one of America’s most popular and important programs. Inaction on Social Security today is irresponsible as the system moves closer and closer to insolvency. Mr. Kerry needs a new vision rather than resigning himself to a status quo that simply does not work. Mr. Bush, on the other hand, must make it clear he has a plan for Social Security through the utilization of personal retirement accounts at the Republican National Convention. We’ll be watching.

Dorcas R. Hardy is the former commissioner of Social Security and currently serves as a co-chair of the Alliance for Retirement Prosperity.

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