Create Personal Retirement Accounts

By James L. Martin

The Miami Herald, Saturday, January 31, 2004

“The Medicare prescription-drug fight last year was about America’s 60-plus generation. Now it’s time to do something for their children and grandchildren by fixing the creaky Social Security system.

The best way to do that is by giving the next generation of retirees, and those who will follow them, the right to establish personal retirement accounts within the Social Security system.

As President Bush said in his State of the Union Message, “Younger workers should have the opportunity to build a nest egg by saving part of the Social Security taxes in a personal retirement account.’

We have favored this approach since 1995, when 60 Plus became the first seniors’ organization to step forward and touch the so-called third rail of politics without getting electrocuted. Yet now, eight years later, we remain lonely in that stance.

No politician in his or her right mind will do anything, especially during an election year, to weaken Social Security or reduce benefits to current retirees. That would be political suicide. And in my more than 40 years in Washington, I’ve met few kamikaze congressmen.

But this doesn’t mean that Social Security reform should be off the table. In fact, an election year is exactly the right time to get serious about reform. Then the next president and new Congress can tackle the issue with some momentum behind them.

Besides, the claim that somebody will get shortchanged if we fix Social Security is a myth. Actually, it’s more deliberate than that: It’s a lie.

Just recently, the chief actuary and professional actuarial staff of the Social Security Administration provided an analysis of what would happen if future retirees — that is, current workers — were allowed to put half of their 12.4 percent payroll tax into personal retirement accounts starting in 2005, rather than handing everything over to Social Security.

The analysis concluded that despite the likely mass migration of younger workers from the existing program to the new personal retirement accounts, the Social Security system would remain solvent and could meet all of its obligations for the next 75 years. And it could do so without tax increases or benefit cuts.

Indeed, the SSA numbers crunchers found that the transition from the old system to the new could be managed without any earth-shattering changes. There is one catch, however: Federal lawmakers would have to reduce the rate of growth in total federal spending by 1 percent per year for each of eight years, 2005 through 2012.

Curb on spending

A reduction in the rate of growth is just that — and shouldn’t be confused with real reductions in federal spending. But this part of the equation is not a cause for optimism, even if we’re asking Washington to slow down only a little.

After all, the Republican-controlled Congress just presided over one of the largest year-to-year spending increases in U.S. history, with nonmilitary ‘discretionary’ spending increasing 8.7 percent in fiscal year 2003 and total discretionary spending jumping 12.5 percent.

Nevertheless, maybe a serious effort to reform Social Security would force Congress to put the brakes on. That might be the case if members of Congress thought that the baby boomers and Generation X-ers would hold them accountable if they squander the opportunity.

Don’t count on the Democratic presidential candidate to drive this debate. Not one will touch it, except to demagogue the issue.

Leading the drive in the coming year will be Bush, who has long favored Social Security reform with personal retirement accounts. And administration officials say that he will make it an issue in the coming election.


James L. Martin is president of the 60 Plus Association, a conservative senior citizens’ advocacy organization.