A debate, by definition, is a discussion between two sides. The current exchange over Social Security reform is not a debate. Instead, one side is ignoring the true issue at hand, while the other is arguing over semantics.
President Bush kicked off what was intended to be the debate over Social Security reform when he appointed a 16-member commission to study the program's problems and report back with frameworks for solving them. The commission, which finished its work in December, called on Congress and other political leaders to spend the next year engaged in a national dialogue about Social Security and reform. The collective response: dodging and demagoguery.
Many Democrats would rather boost their electoral chances by scaring seniors; many Republicans would rather avoid the fight altogether by parsing over the definition of "privatization."
The real issue is being ignored: Social Security faces tough times ahead. That's a fact; it cannot be disputed. Right now Social Security is rolling in surpluses. But when the Baby Boomers start retiring within the next decade, the amount the rest of us pay in taxes won't be enough to pay for all the benefits we've promised.
We'll see the first deficit about 2017. By the time the last of the Boomers retire, Social Security will be awash in red ink: $277 billion in 2030; $357 billion in 2040 and by 2050, the deficit will be $420 billion. All told, between now and 2075, when today's newborns will have retired, Social Security's debts will total more than $25 trillion. That money has to come from somewhere. To maintain current benefits, future workers will face a 50 percent tax increase. Either that or we will have to cut benefits by a third to make ends meet.
That's real money. And it has real consequences for real people.
Already a 20-year-old white male can expect to pay more than $84,800 in Social Security taxes during his working years, but receive only $40,000 in benefits. Any time we raise taxes or cut benefits, the deal becomes worse.
There is a better way. We should act immediately to rescue Social Security by prefunding a portion of the retirement benefits of tomorrow's elderly. Younger workers should be able to put some money aside in a personal retirement account, invest it wisely and reap the rewards of years and years of compound interest.
Every dollar saved in a personal account represents a dollar that the government – i.e., future taxpayers – won't have to pay. Over time, as more and more people save in personal accounts, the burden on future generations will be dramatically reduced. If we act soon, we can secure our children and grandchildren's future, instead of leaving them a lifetime of skyrocketing taxes and falling benefits.
Here are some facts to remember: First, even people with no investment experience will do well with personal accounts. People won't be sent out on their own to buy and sell individual stocks. Every serious proposal for personal accounts constructs them in a way that protects inexperienced investors – as well as low-income workers or younger workers with small accounts – by giving workers a choice among a limited number of broad, diversified mutual fund portfolios directed by professional management firms.
Second, if you are over age 55, you will not be affected by reforms that include personal retirement accounts. Currently, every retiree gets a monthly benefit from Social Security and every retiree gets an annual cost-of-living increase. Under every serious reform plan out there, including those that were put forward by the President's Social Security Reform Commission, that will continue unaltered.
But while we're protecting the elderly, we should at least give younger workers the choice of whether to put some money aside in a personal account and save for their own retirement.
There are serious problems ahead and substantive issues to be settled. We need an honest and open debate. What passes for a discussion today – rattling sabers over semantics or whipping up a scare campaign – isn't getting the job done. Let's leave the games behind and talk about solutions.