http://online.wsj.com/article_print/0,,SB111102071090881840,00.html
CAPITAL
By DAVID WESSEL
Social Security Deserves Better Than Another Partisan Brawl
March 17, 2005; Page A2
President Bush's campaign to create private Social Security accounts
and to stabilize the popular retirement system is foundering. Democrats
are gleeful that their united opposition has shut down the storied Bush
offense.
Score this as a baseball game, and early innings go to Democrats. But
this is not a baseball game. The stakes are bigger.
No one should embrace a fiscally irresponsible plan to change Social
Security or one that exposes Americans to destitution in old age.
Weakening Social Security would be a bad outcome. But so would a
tough, partisan fight that ends without a compromise for fixing Social
Security.
President Bush, who displayed no visible concern with U.S. budget
deficits in his first term, is making a long-term fix to Social Security
a top priority. His argument for action is sound: "Huge numbers of baby
boomers, like me, will be retiring soon, and we are living longer and
our benefits are rising," Mr. Bush said in his Saturday radio address.
"At the same time, fewer workers will be paying into the system to
support a growing number of retirees. Therefore, the government is
making promises it cannot keep." That's not a partisan point. It's a
fact.
Democrats' response so far is to do to Mr. Bush what Republicans did to
the 1994 Clinton health-care plan: Kill it and damage the standing of
the president. That may be smart politics. It may be a natural reaction
to partisan rancor of recent years. But the collapse of the Clinton
health plan set back efforts to cope with rising health costs for a
decade. All of us are paying for that inaction today.
If bickering between Democrats and Republicans blocks a Social Security
compromise this year, will it be another 10 years before any politician
tries again? That would be an unwelcome result. There are good reasons
to act now.
Baby boomers are about to reach retirement age. The oldest turn 59
this year. Most Social Security proposals exempt current retirees
and workers older than 55 from the necessary belt-tightening. That's
prudent: Workers deserve time to prepare for retirement-age changes
or shrunken pensions. Delay means more baby boomers are exempt, which
means younger workers will get squeezed more. "There's the real danger
of grandfathering the baby boom, which literally means we've missed
solving the big problem," says Douglas Holtz-Eakin, director of the
Congressional Budget Office.
If the baby boom isn't grandfathered, the politics get even more
treacherous. If politicians have trouble telling 40-year-olds that they
won't get promised benefits, imagine telling 65-year-olds. What's more,
delay enlarges the tax increase or reductions in benefits needed to
make Social Security sound. Fixing Social Security through 2078 without
squeezing benefits would take a 15% increase in payroll taxes today,
a 21% increase if delayed until 2018 and a 43% increase if delayed
till 2042. (So why do Democrats want to put this off until they regain
control?)
Social Security seems hard. But it's easy compared to health care, a
bigger U.S. fiscal problem. Social Security is only money. Medicare
and Medicaid is money plus ever-improving technology plus Americans'
insatiable appetite for health care plus life-and-death ethics. If
politicians can't do Social Security, will they ever do Medicare and
Medicaid? "Social Security is spring training," says U.S. Federal
Reserve governor Edward Gramlich. "Medicare is the real season."
With a second-term president shouting about the urgency of repairing
Social Security, how did the system get stuck?
Partisanship is only part of the answer. Mr. Bush loudly declares Social
Security broken and then advocates private accounts into which workers
could divert payroll taxes to invest for retirement.
Private accounts -- whatever the merits of Mr. Bush's "ownership
society" -- do nothing to fix the Social Security problem that Mr. Bush
has identified. Democrats have exploited this fact. And, if you listen
closely, Mr. Bush acknowledges it. "Personal accounts do not solve
the issue," he said yesterday. "Personal accounts will make sure that
individual workers get a better deal with whatever emerges as a Social
Security solution." Perhaps he figured the accounts would prove popular
enough to propel the whole effort. If so, he figured wrong.
Mr. Bush's fellow Republicans, meanwhile, are choking on the borrowing
Mr. Bush proposes to pay current retirees when workers divert payroll
taxes to private accounts. Bush-friendly economists explain that this
merely replaces promises that aren't on the books with bonds that are,
but the argument isn't convincing deficit-wary Republicans on Capitol
Hill.
The president's men, stymied, may soon seek compromise. Democrats then
will decide whether the president is moving for tactical advantage or
moving toward a bipartisan solution. Both sides need reminding that
this is not just a game that donkeys or elephants will win. It's a test
of whether politicians can take the first step toward preparing the
U.S. government, and the economy, for the retirement of 76 million baby
boomers.
Write to David Wessel at [EMAIL PROTECTED]
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