Antisocial security

Republicans who argue that savings accounts can save Social Security are hiding the risks -- and the true costs.

Topics: Taxes, Social Security,

Selling a policy idea on its merits is apparently passé these days in Washington. It’s much easier to distort the alternatives instead so that the one you favor becomes the only way to avoid hard choices.

This is how a number of Republicans and conservatives are trying to sell private savings accounts in Social Security, framing them as the fiscally responsible alternative to the politically unpopular options of raising taxes or cutting benefits.

It’s an increasingly common tactic to gain advantage in the long-running debate over Social Security reform. According to a summary of Social Security’s finances written by the system’s trustees, expenditures will exceed revenues beginning in 2017. This shortfall is expected to be met with Treasury bonds from the Social Security Trust Fund — which are paid with general taxes — until those bonds are exhausted in 2041. Most politicians agree some changes should be made in the system soon to avoid potentially major problems in the future, and many Republicans see private savings accounts as the solution.

“[T]he reality is that there are three options available,” White House Press Secretary Ari Fleischer said in a press briefing on July 24. “One is to raise taxes, which was done before and hasn’t worked. The second is to cut benefits, which is something the president doesn’t support. And the third is exactly the president’s proposal, to allow younger workers [the] right on a voluntary basis to put a portion of their Social Security taxes in other investments.”

David John, a Social Security research fellow at the Heritage Foundation, repeated this three-choice framing in an appearance on CNNFN’s “Market Call” yesterday. “[W]e have only three choices in Social Security reform,” he stated. “We can raise taxes, which doesn’t achieve that goal [saving Social Security], dollar for dollar. We can cut benefits, which certainly doesn’t. Or we can do what 20, 25 countries around the world have already done, which is to allow people to invest their money.”

Rep. Patrick Toomey, R-Pa., speaking on the Fox News show “Hannity and Colmes” on Monday, made a similar accusation against opponents of private accounts. “You guys are advocating — what you guys are advocating is nothing,” he said, “which means you’re advocating a benefit cut or a tax increase.”



In an Op-Ed for the Washington Times, former Delaware Gov. Pete DuPont outlined the choices as “cut benefits,” “do nothing, which really means raise FICA taxes,” or “replace some benefits with personal retirement accounts,” which he calls “the only method that adds up to a solvent, long-term solution.”

An Op-Ed in the Manchester Union Leader by Ronald Fraser made the same case. “The alternative [to private savings accounts] is for Congress to continue to raise payroll taxes in the future,” Fraser wrote, “and perhaps cut benefits to keep the current system afloat.”

These all fail to note, however, that adding private accounts to Social Security would almost certainly require raising taxes, cutting benefits or taking money from other programs in order to fund the huge cost of switching to such a system. Specifically, individual accounts divert revenues needed to meet Social Security’s obligations to current retirees, thus worsening — rather than solving — the system’s financial shortfall. In fact, the president’s own Commission to Strengthen Social Security acknowledged that the version of private accounts it supports would worsen the program’s actuarial balance over the next 75 years.

Heritage’s John admitted in a recent UPI article that the hard choices he and his colleagues claim private accounts avoid are actually inevitable. “It’s true that money going into [personal accounts] will not pay current benefits to our parents,” he stated, “but filling that gap will have to be done by the hard choices mentioned above [cutting benefits or raising taxes]. It will just happen sooner.”

John would do well to acknowledge that more often, and Fleischer, Toomey, DuPont and Fraser would do well to join him. But they seem to prefer the facile argument instead.

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