For a group that's given itself over to an absolutist "pro-choice" stand on abortion, liberal Democrats seem far less interested in personal choice when the issue isn't unborn babies. Such as an individual's personal finances or retirement. Such as Social Security reform.
Here, President Bush is the true pro-choice champion.
Well, almost. In his State of the Union address, Bush did make plain the limits of his pro-choice position on Social Security reform: "I have a message for every American who is 55 or older," he said. "Do not let anyone mislead you. For you, the Social Security system will not change in any way."
In short, anyone 55 or older will have no choice but the current Social Security. Their benefits are secure, and their investment options with the Social Security contributions are--and will continue to be--nonexistent.
For younger Americans, however, choice is the keystone of Bush's overall Social Security reform proposal.
If you're younger than 55 and want to remain in the current Social Security system, with its sorry rate of return, you can remain there. You don't have to put 4 percentage points of your payroll taxes into your own personal savings account. It's voluntary. It's your choice.
If you're younger than 55 and you're afraid to put a portion of your Social Security taxes into an array of regulated bond or stock funds, you can remain in the current Social Security system. You don't have to put a penny of your Social Security contributions into the stock or bond market. It's voluntary. It's your choice.
If you're younger than 55 and think your Social Security contributions should revert back to the government when you die, you can remain in the current Social Security system. You wouldn't have to participate in a personal Social Security system that would pass your retirement nest egg on to your family. It's voluntary. It's your choice.
Of course, Bush's Social Security reform isn't as absolutist in its approach as his critics have claimed--or liberal Democrats are on the abortion issue. Participants in the Bush program would not be able to do anything they want with their personal accounts. They couldn't invest in individual stocks, real estate deals or cattle futures. They couldn't withdraw their savings to buy a home or start a business. They couldn't withdraw their savings all at once.
The Bush proposal is a Social Security system based on what the Founders called "ordered liberty." First, the program is phased in over time; not everyone under 55 can participate at once or fully. Second, the government will regulate the stock and bond funds that participants can choose from in the same way it does for the federal employee retirement program's Thrift Savings Plan. There would also be limits on the ability of participants to have money in more volatile funds as they near retirement.
It's true, these personal accounts aren't the solution to Social Security's looming financial problems--the system's $10.4 trillion (present value) net liability. Bush hasn't said they are. But the personal accounts are part of any overall solution in several ways. They take financial pressure off the system by giving future retirees more of their own wealth to plan their own retirements; the increased return from the accounts make benefit adjustments (raising the retirement age and indexing initial benefit calculation to inflation rather than wages, for example) less important. They would ease the adjustments that are needed to curb the automatic acceleration of benefits currently built into the system.
Politically, the sugar of personal savings accounts would make the medicine of benefit adjustments, increased retirement age or tax changes go down more smoothly.
But personal accounts would contribute to the long-term stability of the Social Security system in a substantial respect, as well. Participating Americans would be pre-funding the system with hard assets--nest eggs they own and control, their own Social Security trust funds--that politicians couldn't raid in the years before a worker's retirement. Every American would have his or her own Social Security lockbox.
That is, Americans who want to participate. Again, it's voluntary. It's their choice.
David Reinhard
