Democrats are right: President Bush has conjured up a phony crisis to justify his push to
"reform" Social Security. But as they fight the president's misbegotten plan, Democrats
shouldn't miss an opportunity to offer the nation a better one. Just saying "no" to Bush may appeal to paleoliberals who are in denial about the need to modernize the 70-year-old retirement program. But simple rejectionism is a loser for Democrats, substantively and politically.
Social Security's financial problems seem manageable now, but the baby boomers' impending retirement will overwhelm the current pay-as-you-go structure. Doing nothing to prepare Social Security for the coming age wave is the surest way to bring on the crisis that White House Cassandras now foretell.
Besides, the public expects reform. Most Americans (including most Democrats) worry that Social Security won't have enough money to pay their benefits by the time they retire. Because people trust Democrats more than Republicans to protect the system, Democrats may well be able to block Bush's partial privatization scheme. But if they don't offer an alternative reform, they'll reinforce GOP stereotypes of Democrats as die-hard defenders of the status quo.
There's no need, however, for progressives to couch reform in dreary, take-your-medicine terms. With the responsibility to fix the system come intriguing opportunities to make Social Security better for everyone.
The right kind of reform, for example, could virtually eliminate old-age poverty, spur economic growth, reduce inequality of wealth, and strike a fairer balance between the promises we make to older Americans and the need for public investment in families and children.
Specifically, Democrats should champion four goals for progressive Social Security reform:
First, raise Social Security's minimum benefit so that no American who works and pays taxes most of his or her adult life will live in poverty. The price tag for banishing old-age poverty is surprisingly affordable -- about 0.18 percent of earnings covered by the payroll tax over the next 75 years. We could pay for this change simply by using a more accurate
measure of inflation in adjusting benefits each year.
Second, enable every worker to save and own capital assets. The Progressive Policy Institute has proposed Universal Pension Accounts that would give workers a tax break if they start saving from their first job on. For workers with modest wages, the federal government should also make matching contributions to their accounts, thus boosting the
nation's anemic personal savings rate and building capital for investment. Making every worker a capitalist would also narrow the nation's wealth gap, which is actually worse
than income inequality.
In contrast, President Bush's personal savings accounts would take money out of Social Security and likely require more government borrowing on top of what is already needed to finance his mushrooming budget deficits.
Third, take on the toughest part of reform -- getting Social Security back into long-term fiscal balance and restraining its growth rate. Thanks to the boomers' retirement, increases in longevity, and falling birth rates, the elderly population will grow much faster than the workforce whose taxes support them. Sooner or later, the system will go broke, and policymakers will face a bleak menu of options: deep benefit cuts, tax increases, or more government borrowing. Progressives ought to rule out increases in the payroll tax, which is a regressive levy on work, and instead look for progressive ways to trim benefits for future retirees. Yet such cutbacks would be considerably mitigated by the Universal Pension Accounts and other incentives for saving -- if workers start today.
Fourth, enlist the baby boomers' help in solving the problems their enormous numbers create. Putting off reform now means that the full burden of salvaging the system will fall on their children.
Boomers can do their part by working longer and saving more. Given advances in health and longevity, as well as a coming dearth of workers, it no longer makes sense to encourage people to retire as early as age 62. Instead of raising the retirement age, however, we ought to let workers themselves decide when it's time to quit, and stop penalizing those who want to continue working past 65.
If today's workers start saving and investing more in stocks and bonds, the returns they earn would allow us to trim their Social Security benefits later, without reducing their overall standard of living.
These four reforms would make our retirement policies fairer, more progressive, and more conducive to economic growth. They would put Democrats on the side of social progress by honoring the values embedded in Social Security, instead of defending outdated programs and policies. It's a political and policy opportunity that Democrats can't afford to miss.
