President Bush recently celebrated the 70th anniversary of the Social Security system, which, in the early days, greatly helped to ameliorate poverty in old age. But as Investor’s Business Daily has recently pointed out, the demographic game has run its course.
Unless Social Security is reformed substantially, by providing for the ownership of personal savings accounts that will permit stock and bond investments to finance benefits rather than tax hikes, the system will continue to deteriorate.
Only through market wealth creation will pension benefits for older Americans be fully financed over the long-term. If the government does not embrace this solution, it will break both hearts and promises as it raises taxes and cuts benefits time and again in the future — just as it has in the past.
Simply, the Social Security system will never be fixed until Congress realizes that President Bush is right: The ownership of market asset wealth — which is also a huge policy incentive to maintain our capitalist, free-market, economic-prosperity-creating machine — is the only solution. Sooner or later Washington will come to this realization. We are an IRA nation and there is no turning back.
Ronald Reagan once referred to it as “the magic of the marketplace.” He was correct. In the long-run, markets will keep their promises whereas governments will not.