January 10, 2005,
Irwin Stelzer's article in the latest Weekly Standard is titled, "Social Security Snares & Delusions: How not to squander political capital." Stelzer concludes that Bush's plans for Social Security need to be "shall we say, refined." The condescension is unearned. The Bush administration understands Social Security better than Stelzer, and has given more thought to it.
There are many widespread misconceptions about Social Security. Rather than clear them up, Stelzer perpetuates them. In the course of trying to minimize the program's solvency woes, he spreads the idea that growth can solve them: "[I]f the economy grows more rapidly and efficiently than some predictions suggest, the current system might well prove capable of meeting all of its obligations." He continues, "Improvements in productivity at rates of recent years, for example, will allow the workforce to support a higher ratio of retirees than is now the case; more rapid economic growth will generate more revenues for the system than some of the middle-scenario forecasts assume."
Stelzer should read the rest of his own article. He knows perfectly well that Social Security benefits are tied to wages, and he knows that productivity growth raises wages. So why can't he see that higher productivity will mean higher benefits? Increased growth, whatever its other virtues, cannot make Social Security solvent which is why the trustees of the program rate its chances of remaining solvent over the next 75 years at less than 5 percent.
Other minimizers argue that the Social Security Trust Fund will pay for benefits through 2042, so there's nothing to worry about. They're wrong. The trust fund contains IOUs. The government will have to raise revenues or cut spending to pay them off. So where does Stelzer come down on the question of whether the trust fund contains assets upon which the federal government can draw to sustain Social Security?
"Some estimates show that taxes currently earmarked for the program, along with earnings on the Social Security Trust Fund (for our purposes letís assume that there is such a thing, rather than reopen the tiresome debate about the 'lockbox') will cover outlays until 2028. Others put the date at which the current system will be unable to pay all promised benefits at 2042." This is a cop-out, a refusal even to try to ascertain the truth on the ground that the effort would be "tiresome." We are talking, after all, about $5.8 trillion that the federal government will have to pay off.
Stelzer writes that conservatives "should not lightly contemplate" a change in the benefits formula, since it would be a change "in what can be characterized as a social contract between active workers and retirees." All right, then: Let's not lightly contemplate it. But let's understand that given the fiscal realities that Stelzer tries to wave away, a change in that social contract is coming: either a big increase in taxes on those active workers, or a substantial benefit cut for future retirees, or some combination of the two.
Stelzer dismisses the potential of personal accounts, but is again unfamiliar with the debate. He assumes that the accounts would be tightly regulated and would have to be converted upon retirement to annuities. "So much for freeing citizens from the heavy hand of the state." In truth, none of the plans out there require full annuitization. And while those plans include limits on investment options which also exist in 401(k)s, and in the government's Thrift Savings Plan they generally provide workers with real choices too.
Stelzer alternative plan is for the president to. . . appoint a commission. This commission will study Social Security and tax reform. The president, Stelzer writes, "might. . . benefit from further reflection." Stelzer's readers would benefit if he did his homework before writing articles.