10/19/04 — Social Security: Keeping it secure will be expensive

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Social Security: Keeping it secure will be expensive

The American people need to decide: Should Social Security be a permanent program, or should it be allowed to peter out?

If the program is to continue indefinitely, whoever is inaugurated as president in January should begin the term with a resolve and at least the foundations of a plan. Saving Social Security will be costly, but the longer we wait, the more costly it will be.

The ratio of people working and paying into Social Security, compared to the number drawing benefits, will decline sharply when the baby boomers start retiring during the next presidential term. Eventually, unless something is done, benefits will have to be paid from general tax revenues and taxes will have to be raised to unacceptable heights.

Now, money paid into Social Security by workers and employers goes into what amounts to a lending pool for the federal government. So, instead of money, the Social Security Fund is a collection of IOUs.

The trustees of the fund have warned that in about four decades, all of those IOUs will have been called in and the money paid out. Unless the system is reformed, it will be broke. Benefits will have to be cut so that what workers pay in will match what the system pays out. Or, taxes will have to increase astronomically.

The Democratic presidential nominee, Sen. John Kerry, has acknowledged that the system is on a downward slope. He says economic growth can fix the problem, and he has promised that, as president, he would not cut benefits or privatize Social Security.

Just in case an expanded economy didn’t solve the problem — as it almost assuredly would not — that leaves just one choice: Higher taxes.

President Bush has discussed a plan to allow a partial privatization of Social Security. Workers would be allowed to invest some of their withheld money in private, protected securities accounts. Upon retirement they would receive, in monthly payments, all of their money back, plus whatever it had earned. That would provide more security for today’s younger workers.

Starting it would be expensive. The money placed in private accounts would be diverted from regular Social Security and, presumably, would have to be replaced so that payments could continue. But this is better than no plan at all, if the program is to continue.

There is no easy solution, and no cheap one. That is why we need to decide, once and for all, whether we are really willing to pay the price to save Social Security.

Published in Editorials on October 19, 2004 11:11 AM