...And Here's How To Do It

In Washington last week, the Democrats rehearsed a new line: President Bush is approaching Social Security reform the same way he entered Iraq—precipitously, declaring a crisis where none exists, creating a solution that promises to be disastrous. They were also, privately, mystified. Why was George W. Bush choosing to waste his honeymoon political capital on this particular can of worms? The polls indicate no great public clamor to change the system (and the Democrats were right about the absence of a crisis—there is a Social Security problem; there is a Medicare crisis). Indeed, there were rumblings of discontent among congressional Republicans, some of whom still aspire to fiscal responsibility and fear that the President's proposal, when it comes, will break the bank. Others are afraid the Democrats' ancient entitlement demagoguery—the Republicans want to steal your retirement!—still has sting. Why on earth didn't the President lead with tax reform, which is always fun, incomprehensible to the public and inevitably profitable for the G.O.P.'s traditional Gucci constituencies?

"Ideology," said Senator Ted Kennedy flatly. I suppose that's true, but in a far less pejorative way than Kennedy supposes—and with a dash of legacy trolling and party building built in. The President believes in his "opportunity" society, believes a retirement system that allows individuals to make their own investment decisions is better than one that doesn't. He also believes that even if young people aren't quite sure about personal investment accounts now—in last week's TIME poll, those under 34 had mixed feelings about the idea—they'll love them in years to come. Karl Rove's dream is that this generation will eventually feel the same allegiance to Bush and the Republican Party that their grandparents felt for F.D.R. and the Democrats. And beyond the politics and ideology, there is the President's style: Bush loves bold. He sneers at small, is annoyed by niggling. If you're going to reform Social Security, why not Roto-Rooter it? In this particular case, he has a point.

Private investment accounts are a terrific idea, if you can afford them and they are carefully regulated. They will provide a higher rate of return than the current system, if the economy doesn't tank (in which case the current system may not make it either). And there are social intangibles that come with ownership. When I visited Chile to look at its privatized Social Security system 10 years ago, I met with formerly radical factory workers who proudly brandished their retirement-fund statements and told me they were now paying as much attention to the business page as the sports page in the newspaper.

It seemed ownership had invigorated the country, made a frail democracy more stable. By most reports, the Chilean system continues to thrive.

But intangibles are, well, intangible, and liberals have grown very conservative when it comes to social policy. They prefer certainty over choice. The "ifs" involved in the partial privatization of Social Security are titanic, especially when one considers the wanton fiscal irresponsibility of the latter-day Republican Party. Any attempt to move toward private accounts will be costly, given Social Security's current obligations—and any proposal to make the change without paying for it would be economically dangerous, given the country's enormous budget and trade deficits. Also, if we're going to be serious about this, there has to be some controlling legal authority over the private accounts. Chileans choose among seven very conservative, government-approved funds. "You have to be careful," agrees Senator Lindsey Graham, Republican of South Carolina. "You can't have people day trading."

It is a flagrant violation of the Secret Protocols of Political Columnists to mention the same politician favorably two weeks in a row, but Graham has forced it upon me. He excoriated the Attorney General-designate Alberto Gonzales last week for allowing the White House to loosen the rules on torture. This week, praise goes to his Social Security reform plan. Graham actually approaches fiscal sanity. He would offer individuals a chance to invest up to $1,300 of their payroll taxes per year in any of five government-approved funds, ranging from stock indexes to private bonds to government paper—or to stay in the current system. He would pay for this by raising the cap on the Social Security payroll tax from $90,000 to $200,000, and by changing the benefits formula to reflect changes in consumer prices rather than wages, an option sanctioned by the Moynihan-Parsons Commission in 2002. Graham blanched when I called it a tax increase, so let's call it a shockingly supple revenue emolument. It is unlikely to attract support from the cowboy wing of the G.O.P.

Which is why Democrats—especially those who understand that the industrial-age social safety net can be improved for the information age—should not dismiss this simply because it involves Bushian private accounts. Graham is not without powerful Republican allies; he is close to Charles Grassley, the Senate Finance Committee chair whose support is crucial to any reform. In fact, if the President is serious about personal investment accounts, he should take a close look at Graham's plan too.