(2 of 3)
The majority of Americans can afford to save for their own retirement, and will need to do so. But even the personal-security-account option suggested by members of the Social Security advisory council would guarantee today's benefits for everyone over the age of 55 in 1998, while phasing in those between the ages of 24 and 54. And the system would maintain a safety-net program that would prevent any retiree from sinking into poverty. "No matter how you ask the question," says Republican pollster Robert Teeter, "Americans strongly support taking care of our seniors and anyone else who can't take care of themselves."
Senate majority leader Trent Lott seemed to understand this distinction at the end of the congressional session last summer, when he broke a logjam to pass not only welfare reform but also an increase in the minimum wage and a bill making health insurance more portable as workers move between jobs. Voters rewarded him and his colleagues with the Senate's highest approval ratings in a decade and with a Republican gain of two seats in the November elections.
Burned in their past attempts to reform Social Security, Republicans examined last week's advisory-council report with barbecue tongs and mitts. But Senator Bob Kerrey, a Democrat from Nebraska, immediately submitted legislation that would give workers more control over how their Social Security contributions are invested. Kerrey dismissed as "condescending" the notion that the average American can't be trusted to invest his own money. "Millions of middle-class Americans," he observed, "are investing successfully today," and their numbers are growing rapidly. Most of them are prudent enough to shift their savings gradually from the volatile stock market to stable short-term investments as they approach retirement.
The risks of partial privatization of Social Security pale next to the actuarial certainty of Social Security's bankruptcy if nothing is changed. And in its current form, the program's regressive payroll taxes already impose a huge burden on most working families, who will never get back what they're paying into the system and are forced to subsidize retirees who are, on average, wealthier than they are.
Social Security is scheduled to start spending more than it collects in about 2012, just as the huge baby-boom generation begins to retire. By 2029, even the so-called Social Security trust funds would be depleted. Thanks to men like Kerrey and investment banker Pete Peterson, president of the Concord Coalition, more and more Americans understand that the Social Security "trust fund" is a myth. Every week's collection of Social Security payroll taxes first goes to pay benefits to today's retirees; then the surplus (currently about $565 billion) is immediately used to finance other federal spending. What goes into the "trust funds" is government ious that can be repaid only through some painful combination of spending cuts, tax hikes or further borrowing.