- The Washington Times - Saturday, March 12, 2005

The administration push for personal Social Security accounts is not 3 months old and is already running aground.

Polls report diminished support for personal accounts, and Republicans are scrambling. Some deny they ever supported personal accounts in the first place. Even the most dedicated proponents decry that “our messaging is all wrong” on Social Security. This is a mess. And it will only worsen, unless proponents of Social Security personal accounts figure out what they’ve done wrong, and make a quick correction.

This isn’t just a PR failure. It isn’t just a failure of messaging. It’s a failure of policy—a case of spending 20 years selling the public on an idea, and then proposing something very different.

For 20 years, think tanks have made the case for Social Security reform, saying it is wrong for government to force workers to contribute to a system of retirement savings and then give them a lousy return. We’ve told the American people they would have almost been better off putting the money in a hole in their back yard than paying into Social Security.

We’ve told them the Social Security system eventually would collapse under the weight of its flawed design. Most important, we’ve said personal retirement accounts were the solution.

This message has worked, and has created a window of opportunity on Social Security reform. Poll results have shown these arguments make sense to the people. But the most important poll is on Election Day. And on the last several Election Days, Republicans ran and won on these arguments.

Unfortunately, as soon as Social Security reform became a political possibility, we started hearing personal retirement accounts were not sufficient to solve the problem. We started hearing we need to change the benefits formula, sharply cutting future benefits. We started hearing about changing the retirement age, and even raising taxes. And we started hearing these things even from conservative and free-market policy institutes, and from analysts and columnists paid by them.

It’s no wonder the public is confused and is losing its enthusiasm for reform. We’ve pulled a giant bait-and-switch on them, for 20 years promising a better deal from Social Security, and now suddenly discussing a worse deal. What happened?

Social Security reform has been hijacked, that’s what has happened. While the pro-growth, supply-side, opportunity crowd sold the American people on personal accounts, the green-eyeshade, bean-counting, austerity crowd that kept taxes high after World War II and led to the loss of Republican control of Congress for 40 years is running Social Security reform. The crowd that led our current president’s father to break his “no new taxes” pledge has gained influence over the administration’s Social Security efforts.

Let’s reset for a minute: The problem with Social Security is not that benefits are too high, or that payroll taxes are too low. It’s not the retirement age. Social Security does not promise too much. Social Security delivers too little.

We need to resume talk about transforming Social Security into a spectacular new engine of wealth creation and worker empowerment, instead of reducing retirees’ expectations even further. Then we need to actually propose such a system.

The point of personal retirement accounts has always been to give American workers a much better return on their forced savings contributions, repairing Social Security’s liability problem and creating a new pool of investment capital. But now that the focus has moved to simply restoring the liquidity of the Social Security system, the proposed solutions are no longer as attractive, and the “messaging” starts failing.

But is there any proposal for reforming Social Security that lives up to 20 years of rhetoric, and that would appeal to voters enough? A proposal that, for instance, neither cuts benefits nor raises taxes? A solution that guarantees every American worker at least as much as he would have had under the existing Social Security system but delivers much more? A solution that doesn’t tell you when you must retire?

Well, there is such a proposal. The Social Security Administration itself scored last year’s Ryan-Sununu legislation as completely eliminating the trust-fund liability and giving workers a better return than the current system.

But that is not what the administration is being pushed into. Instead, we’re hearing about small accounts, limited to $1,000 per year, but phased in even more stingily. We’re hearing about cuts in future benefits by changing the indexing formula, a mistake Britain made and is now trying to undo. We’re hearing about lifting the cap on payroll taxes, a huge supply-side tax increase. In short, a plan designed to destroy support for personal accounts.

This is exactly the wrong approach to Social Security reform. The Ryan-Sununu approach is the way out of the wilderness. The administration and Congress need to acquaint themselves with Ryan-Sununu before it’s too late.

Tom Giovanetti is president of the Institute for Policy Innovation (IPI).

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