Columnist David Reinhard of The Oregonian talks in a clear and compelling manner about the need to reform Social Security. If after reading Reinhard's whole piece, you think he's missing something, add a comment here. I know this much: when someone miraculously writes about this topic in Plain English, I get interested.
President Bush had a holiday assignment for the media kvetchniks who were grilling him on Social Security reform at a news conference right before Christmas: Read the "Moynihan Report."Granted that's probably not the best way to sell a partial-privatization plan for Social Security. Although it is worth saying again and again that a liberal Democrat of Daniel Patrick Moynihan's stature endorsed partial-privatization as a way to save Social Security, Bush will have to distill and popularize the report over the coming months if he's to be successful....So let's take our first look at the Moynihan report.
....If you were designing a Social Security system today, would you create the same system President Franklin Roosevelt and the New Dealers came up with in the mid-1930s to ensure that Americans save for retirement?
....The current Social Security system is a prisoner of demographics: declining birth rates and longer life expectancies. Fewer workers are and will be supporting more retirees living longer. (The Moynihan Report says) "As an income transfer system, Social Security works best with a high ratio of workers to beneficiaries. When the United States had a rapidly growing work force supporting a small elderly population, Social Security seemed sustainable. But when fewer new workers are paying into Social Security and more new beneficiaries are collecting from it, the burden placed on individual workers must inevitably rise."
Declining birth rates means fewer workers. And declining U.S. birth rates have a lot to do with self-absorbed Blue City Liberals, busy eating Stilton and taking trips to Provence, all the while moaning that today's world is just too dicey - or precious natural resources too scarce (hah!) - to have any children, or more than one.
Yet the levelling off of social security's workforce funding base need not be fatal. Reinhard also observes we're increasingly a nation of investors, and that part of the retirement system for federal employees actually provides a working model of partial privatization of social security for the rest of us.
...Mutual funds have allowed small savers to pool their investments over a range of stocks and bonds. In May 2001, the report notes, 93.3 million Americans -- 52 percent of all households -- owned mutual funds, and 29 percent have household assets of less than $50,000.A market-based, worker-owned model for Social Security reform came into being in 1986. It's the Thrift Savings Plan that's part of the retirement system for federal employees. They can put their retirement savings into three funds (short-term non-marketable U.S. Treasury securities, a commercial bond index and an equity index fund). One measure of the program's success is that 86.6 percent of all federal workers participate. They're not participating because it's a bad investment.
Why shouldn't Social Security participants be able to save and invest -- and own their retirement nest egg -- in a similar way and outstrip the current Social Security's system's pathetic returns?
(President Franklin D.) Roosevelt seemed to understand that Social Security would always be a work in progress. As he said in signing amendments to the Social Security Act just four years after its enactment, "We must expect a great program of social legislation . . . to be improved and strengthened in the light of additional experience and understanding."
And "improving and strengthening" social security may well require a smaller government role.
Hat Tip: The Mighty Orbusmax, news sentinel of the Northwest.
Posted by Matt Rosenberg at January 6, 2005 04:18 PM
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