Congress will soon begin the formidable task of revamping
Social Security, the cornerstone of
American social policy in this century. As the
proud heirs of Social Security's creators, Democrats have
both an opportunity and a responsibility to define ourselves
for the next century through our approach to reform.
If we accept this invitation to re-examine ourselves
and our policies, we can solidly establish ourselves in
the public mind as the party with a sound, innovative,
and mainstream agenda. But if we decline, we will invite
Republicans to write their signature on Social Security
and steal our inheritance.
As Major Garrett and Timothy Pennynote in the preceding
article, politicians often describe Social Security
as an irrevocable social contract. But even Franklin D.
Roosevelt recognized that this country demands "bold,
persistent experimentation." He challenged future generations
to continue improving Social Security.
Social Security is a "development towards [a] goal,
rather than a finished product," Roosevelt observed.
"[W]e should be constantly seeking to perfect and
strengthen it in the light of our accumulating experience
and growing appreciation of social needs." After 63 years
of accumulated experience with Social Security, every
Democrat must ask him or herself: Is this the best way to
provide elderly Americans with economic security?
Republicans are still in the majority in Congress, but
under new leadership in the House and sharply divided
over their agenda. Under such circumstances, Democrats
may be tempted to sit back and watch the discord
on the other side of the aisle while defending the status
quo on Social Security and other issues during the run-up
to the 2000 elections.
That would be a serious error. As Roosevelt counseled,
Democrats must constantly move forward, seeking new
territory and new thinking. Our policy on retirement security
must evolve from maintaining consumption and
income to facilitating the economic development of all
Americans. If we structure Social Security reform around
that principle and seize the initiative, we will prevail.
Poll after poll shows that Americans strongly support
Social Security and are willing to pay their fair share to
finance it. Mindful of such surveys,
many Democrats oppose anything more than marginal
changes to Social Security for fear of alienating voters,
particularly the elderly. But a remarkable shift in the
political tide will occur as the Social Security debate begins
next year.
Most young and working Americans know Social Security
only as the system that helps to support their
grandparents or parents. But as reform becomes daily
headline news, these younger Americans will begin
viewing Social Security from a new perspective -- as future
beneficiaries. As the debate intensifies and efforts to
educate the public increase, these Americans will learn
the truth about Social Security, both the good and the bad.
For the first time, members of Congress will become
accountable on this issue to the new generation of constituents.
Mail and calls about Social Security will begin
pouring in from college students and baby boomers.
Young and working Americans will soon begin asking
themselves: Is Social Security in its present form the best
we can do? Democrats must be ready with an answer.
While Americans appreciate that universal social insurance
contributes to a sound economy, many believe
they would be better off investing for their retirement
themselves. Today's generation is markedly independent
and entrepreneurial. At best, many of its members
feel disconnected from Social Security. At worst, many
believe they won't see a dime from their investment in
Social Security when they retire.
If young and working Americans look Social Security
squarely in the eye and don't like what they see, they
may turn their backs on the program and join the call for
dismantlement and total privatization. Social Security's
universality -- the fact that Americans from all walks of
life contribute to and benefit from it -- has been the one
feature sustaining it all these decades. Democrats should
recognize that erosion of universality, and with it, popular
support, are the real dangers to Social Security.
Our party must not sit back, hide behind the excuse
that Social Security is the third rail of politics, and dare
anyone to touch it. It is just too risky. We may lose.
Social Security is our legacy. It is our responsibility to
protect that legacy. We must prevent any erosion in
Social Security's universal appeal by setting forth bold
new policies. If we fail in this duty, rest assured that the
Social Security program for the 21st century will be
crafted entirely by the Republicans and supporters of
total privatization.
Nearly all knowledgeable observers agree that, for economic
and political reasons, comprehensive reform
can happen only in 1999. Next year will present a limited
window of opportunity. There is no time for partisan
bickering, heated rhetoric, or demagoguery. We must
immediately move to build a reform consensus on realistic,
centrist solutions.
Social Security reform should rest on four pillars: individual
accounts; increased progressivity; a strengthened
disability program; and fiscal responsibility. These are
ideas that Democrats, Republicans, and the American
people can all agree on. Democrats should embrace
these ideas quickly and brand them as their own.
If we are not careful, the coming debate will become
hopelessly mired in a fight between advocates of individual
accounts on one side and of collective investment
on the other. But we can avoid this bog if we recognize
that the advocates are posing a false choice.
Creating a measure of opportunity for equity investment
through individual accounts, if done properly, is the
perfect 21st century message for Democrats. Our job
now is to define the individual account on our terms.
Democrats must state clearly that Social Security
should not be fully or even mostly privatized. Reform
should not force ill-prepared people into the stock market
to hunt for the best investments. Individual accounts
should not be the sole answer to reform, but rather a
core component.
We should make individual accounts a small portion
of Social Security, leaving the defined-benefit foundation
intact. For example, Sen. Judd Gregg (R-N.H.), Reps. Jim
Kolbe (R-Ariz.) and Charles W. Stenholm (D-Texas), and
I have developed a bipartisan proposal (see box, right) to
reduce the payroll tax by 2 percentage points and shift
those funds into retirement accounts owned and managed
by individuals an asset they can pass on to heirs.
The new individual accounts should be administered
in a way that shields beneficiaries from fraud. Many account
advocates look to the Federal Thrift Savings Plan
-- a heavily regulated and limited system -- as a model.
Under the bipartisan plan that I have helped develop,
workers would be given a limited menu of fund options
selected and overseen by an outside board set up by the
Social Security Administration. The funds would have
varying degrees of risk. Our plan also would let individuals
make limited voluntary pre-tax contributions to
their accounts. This would create an easy way to save for
many Americans, especially those who do not have pensions
and find the maze of IRAs too confusing.
Democrats must stop perpetuating the myth that equity
investment and the stock market are gambles only
the rich can afford. We must stop circulating horror stories
about predatory investment advisers and market
crashes. Doing so is misleading, counterproductive, and
paternalistic.
Yes, the stock market is risky. But experts agree that
equity investment has a proper role in a long-term, prudent
retirement strategy for individuals at every income
level. Equity investment and the magic of compound interest
should be available to every American. Without
them, the poor and near-poor will be pushed further to
the fringe of the economy.
Yes, it's true that many Americans know little about
stocks, bonds, annuities, and mutual funds. Individual
accounts won't work without an extensive public education
campaign about investment strategies. Frankly,
such a campaign is long overdue.
The goal of Social Security is to provide economic security
to all Americans, especially those most in need. In
1935, an era of severe economic hardship, we chose to
provide security through a system that redistributes
wealth. We must maintain this foundation of social insurance.
However, we also must prepare Social Security
for the postindustrial global economy. Democrats
should heed Roosevelt's advice to treat Social Security as
a work in progress rather than a finished product.
Shouldn't Social Security do more than simply sustain
those on the fringe of the economy? Shouldn't
Democrats do more to help bring these Americans into
the economic mainstream?
Some Democrats favor a plan that would permit the
government, but not individuals, to invest some portion
of Social Security reserves in equities. If we adopt this
approach, we will have missed an opportunity to help
Social Security and our party evolve. Adding individual
accounts to Social Security builds upon social insurance
by providing individuals with a direct stake in their economic
advancement.
This is the policy Democrats must champion to restore
Americans' faith in Social Security and to advance our
party's political fortunes. If we fear the dismantling of
Social Security, we must rebuild it ourselves.
Individual accounts should not lessen Social Security's
progressivity. Our bipartisan reform proposal would increase
progressivity through a minimum benefit provision
that would ensure that no individual who spent a
lifetime working would retire in poverty. This is more
security than the current system provides. A low-income
worker's individual account would be a bonus beyond
his or her traditional benefit.
Progressivity can be expanded in several other ways.
The government, for example, could lend a hand to
lower- and middle-income workers by providing for
matching funds or minimum amounts within an individual
account.
One-third of Social Security beneficiaries are not retirees
but disabled Americans. The disability program is essential
to the safety net, and it is in the worst financial shape
of all the programs that Social Security encompasses.
Democrats must ensure that it does not get left behind in
the debate over Social Security reform.
It is impossible to give the disability program the full
treatment it deserves within the confines of this article.
The program is part of a complex web of federal and
state agencies. Disability issues spill over into Medicare,
Medicaid, Supplemental Security Income, and vocational
rehabilitation, all of which require thoughtful examination.
Democrats should take the lead and establish a
forum to discuss disability issues.
Democrats must not depend on projected federal budget
surpluses to fund "no pain" solutions to Social
Security's problems. Let's be clear: Projected surpluses
are an unrealized victory. A recession could cut them by
half or more.
The public could well think that the slogan "save the
surplus for Social Security" means "the surpluses will
save Social Security." Worse yet, some policymakers
may start to believe this. No one can predict the condition
of the economy in years to come. Democrats must
prepare Social Security to withstand even the gloomiest
economic scenario.
Social Security reform requires tough choices. Sending
any other message to the public is wrong. If we spend
one dime of an unrealized surplus to avoid making a politically
tough but necessary choice -- such as raising the
retirement age or adjusting the Consumer Price Index
-- we will be guilty of lying to the American people.
Democrats should not advocate an increase in the
payroll tax. To do so would expose us to the old "tax and
spend" label. Worse yet, to do so would be bad economic
policy. More than 80 percent of families already pay
more in payroll taxes than in income taxes. For middle-and
low-income Americans, increasing regressive payroll
taxes would be the most painful solution of all.
Democrats must look beyond the problem of Social
Security's solvency. Even if its books were balanced, an
unreformed program would absorb nearly 18 percent of
income subject to payroll taxes, up from 12.4 percent
now. Social Security's unfunded liabilities are approaching
$3 trillion, and they will have to be paid with taxes
not yet collected. We must protect future generations and
tomorrow's economy from this daunting tax burden.
Finally, we must not forget other Democratic priorities.
Continued economic growth depends upon increased
productivity. Increased productivity, in turn,
depends upon a growing labor force and greater worker
output. But labor force growth has slowed dramatically,
with little chance of reversal. Thus, America's future
economic growth, by necessity, will depend far more
heavily on the quality of our work force.
Increasing the productivity of American workers
means investing in training, education, health, and nutrition.
It also means investing in new technologies and infrastructure.
These investments will become even more
critical as America's work force becomes more racially
and ethnically diverse, because minorities historically
have had less access to health, education, and training.
We will soon face a momentous collision of financial
pressures. Entitlement spending is bearing down on
the federal budget and constraining our ability to
invest in the quality of our work force. Democrats must
prepare for this collision by balancing all Democratic
priorities, not by simply increasing revenues to entitlement
programs.
Democrats have rightfully laid claim to the legacy of
Social Security. We must not squander this rare opportunity
to live that legacy. With a Republican majority in
Congress and an impending need for reform, Democrats
must save Social Security both politically and financially.
We must save it not by throwing roadblocks at reform
but by leading reform. We must define Social Security
for the 21st century. Let's rise to the challenge and honor
Roosevelt's bold experiment.
