Politics & Policy

Insecurity

The future of Social Security.

The final months of the 2004 presidential election were fought on the wisdom and implementation of George W. Bush’s doctrine of preemption–which boiled down to “getting the enemy before they get us.”

Surprisingly, the debate over preemption wasn’t limited to the war in Iraq or even to the broader war on terror, but was at the center of the debate over the future of Social Security. During his primetime convention speech, and in other speeches around the country, President Bush argued that Social Security’s looming insolvency was a threat to the economic security of tomorrow’s retirees. For this reason, he called for preemptively overhauling Social Security by moving our nation’s retirement program from a pay-as-you-go system–where current taxes pay for current retirees–to a partially pre-funded system where a portion of a worker’s Social Security taxes would be placed in personal investment accounts that would provide a retirement nest egg. The balance of our Social Security taxes would continue to provide benefits to seniors who are already in or near retirement.

Senator Kerry didn’t necessarily oppose preemptive action on Social Security. In fact, in an appearance on Meet the Press earlier this year he admitted that in 1995, when he thought Social Security was going broke, he favored raising the retirement age and means-testing Social Security benefits. Since that time, however, he came to believe that Social Security was not in jeopardy and said he believed that “economic growth” could delay any need for action. In fact, in the last months of the campaign, he noted that a “tweak here and a tweak there” could put Social Security on a sound footing for decades to come.

The primary difference between the candidates on whether or not to take preemptive action boiled down to their differing views of the threat that lies ahead. One candidate argued that preemptive and bold action was called for, while the other argued that tinkering and delay would suffice. So, what was the existing intelligence that each candidate relied on to tell them about the threat of an unreformed Social Security system?

Clearly, Federal Reserve Chairman Alan Greenspan gave the gravest and clearest warning of all. In a speech late last month in Jackson Hole, Wyoming, Greenspan pointed out the significant demographic changes our country has undergone. Due to the low fertility rates of American women and the aging of the baby boomers, we are faced with a dramatically rising elderly dependency ratio. Greenspan noted that this population shift will pose “substantial challenges” to Social Security, which he noted is already in a long term “chronic deficit.” His warning came with a caveat that while “stark choices” must be made in order to put Social Security on sound footing, these changes, if done sooner rather than later, could stem the need for changes that would be both “abrupt and painful.”

Greenspan’s warning only added to the chorus of alarms that were being sounded on the need to reform Social Security. Almost every independent and non-partisan organization that has studied Social Security has come to the same conclusion: the shrinking worker-to-retiree ratio is putting Social Security’s finances in jeopardy. Within two decades Social Security will be running substantial deficits that will eat away at the security of future retirees, and will put significant strains on the tax burdens of future workers. In short, Social Security is on a certain path to insolvency–a path that can only be changed by immediate and decisive action.

This is a path that voters clearly understood–and they voted for the candidate that understood the dangers of inaction. To counter the looming deficits and mounting taxes that constitute Social Security’s twin axis of evil they elected a president willing to put his reputation and legacy on the line–one who recognized the threat that lies ahead and was willing to act.

America’s future now depends on President Bush’s willingness and skill in moving forward to preemptively reform Social Security for tomorrow’s workers. It is essential that we rally around him and support his effort. Our children and grandchildren depend on his victory.

Derrick Max is the executive director of the Alliance for Worker Retirement Security.

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