- The Washington Times - Monday, October 11, 2010

President Bush was elected and re-elected largely on a promise to allow Americans to own and control a portion of their Social Security taxes. Personal accounts were a vehicle to build real wealth and retire rich. In 2005, however, he badly botched the pitch for Social Security reform by trying to sell the country on benefit cuts, with only token personal accounts as a sideshow. By promising lower benefits instead of higher benefits, he ran the reform effort into a ditch and set the stage for Democrats to take control of Congress in 2006.

Since then, the public’s attention shifted to other fiscal problems, mainly the reckless explosion in federal spending and unprecedented intrusion of the federal government into the private economy. Those issues, not Social Security, are motivating voters this year. Democrats are desperately trying to demagogue Social Security to change the subject, but advocates of personal accounts should welcome the conversation because we still have the only real, pro-worker solution.

Social Security is currently a transfer program: Current workers pay for the benefits of current retirees. Fifty years ago, there were 16 workers for every retiree. This year, for the first time, it dropped below three workers per retiree, and in 10 years, the Social Security Trustees project it will drop to 2.5 workers, followed by a drop to 2.1 workers by 2035. If Social Security continues to be a transfer payment, it will place an incredible strain on workers in the near future and derail economic growth.

Even if Social Security weren’t headed for this demographic reckoning, it would still have a problem that’s even bigger than its insolvency: It’s a bad deal for workers. For many workers, Social Security promises (a promise it can’t even afford to keep) less than a 1.5 percent real annual rate of return. For some workers, the real return is negative - they get back less than they put in. Polls show that most young workers don’t expect to ever collect any Social Security benefits.

Root-canal Republicans are expected to join Democrats in embracing a replay of the 1983 Greenspan Commission that raised the retirement age, cut benefits and raised Social Security taxes. While these moves might alleviate the problem from the perspective of federal government finances, they would make an already bad deal for workers even worse.

There is another option. We must begin investing Social Security dollars in real assets that will earn a real rate of return. Back in 2005, the chief actuary of Social Security found that at least four separate proposals could achieve full solvency by harnessing the power of higher investment returns, without tax increases or benefit cuts.

Democrats are wrong to claim that personal accounts would hand Social Security over to Wall Street because - unlike having Washington centrally manage investments, as Bill Clinton favored - individuals would make their own decisions along with their choice of financial advisers.

The idea would be to take control of retirement away from politicians in Washington and from politically connected Wall Street insiders and put it in the hands of workers themselves. The upside is that the accounts would be able to provide much higher returns than the current Social Security system even promises, let alone what it can actually pay. They can therefore be sold to the public as what they are - benefit increases.

A reform plan should also include - as the 2005 plan by Rep. Paul D. Ryan of Wisconsin and then-Sen. John Sununu of New Hampshire did - an ironclad guarantee that no worker could do worse under the new system than what the old system promised. The guarantee would keep the focus on the upside of personal accounts as a way to provide substantial increases in Social Security benefits for workers. And because real investment returns would be so much higher than what the current system promises, the guarantee would come into play for a small number of workers and be relatively inexpensive.

That’s the pro-growth vision, and that’s what Democrats are so afraid of: Americans who don’t need their vote-buying political largesse. Most voters who understand the stakes will choose universal retirement prosperity over continued dependency on Washington.

Phil Kerpen is vice president for policy at Americans for Prosperity.

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