Hopes amid the stumbling, Peter Ferrara, Washington Times, 10-8-05

The Washington Times
Hopes amid the stumbling
By Peter Ferrara
October 8, 2005

President Bush conceded Tuesday what has long been obvious, indeed, predicted by some of the staunchest personal account advocates. His Social Security reform efforts have stalled out. Personal accounts for Social Security, however, are still alive and kicking on the Hill, and can still pass within the next few months.

Mr. Bush to me is a brave and endearing figure of high character, who has been poorly served by others on many fronts. That is the case in his Social Security reform failure too.

The president campaigned in and won two national elections on the still highly popular personal account option for Social Security. He did not talk then about cutting future promised benefits sharply through price indexing of the benefit formula, or delaying the retirement age, or raising taxes by increasing the maximum cap on Social Security taxable income.

Instead, he rightly talked about the new opportunity and prosperity personal accounts would bring to working people. And in 2000, 2002 and 2004, dozens of Republicans won congressional elections following him in this position.

But once he got to Washington, his staff was intellectually dominated by the old-line policy establishment desperate to get Mr. Bush away from the truly revolutionary accounts and back into the old box of tax increases and cuts in future promised benefits. Despite the president's better instincts, his staff misled him back into this swamp of failure.

There is a true scandal here as the staff sold the president the canard Democrats would support personal accounts in return for his support of price-indexing Social Security benefits, which would hugely reduce future benefits promised under current law. As should have been expected, the Democrats have uniformly opposed such price indexing.

The idea the Democrats were pining away for huge cuts in future Social Security benefits was absurd from the beginning. The staff's price indexing debacle was the equivalent to suggesting the president could get Democrats to support sweeping tax cuts if he would only embrace cutting food stamps and public housing.

Earlier this year, the president was even sent out to argue for personal accounts, while ridiculously mouthing the proposition the accounts would not solve Social Security's problems. To address long-term solvency, the president put "on the table" large reductions in future promised benefits, delayed retirement age -- and even tax increases.

The staff had sold the president another scandalous canard here as the chief actuary of Social Security, a nonpartisan career bureaucrat who knows the numbers better than anyone, scored several personal account proposals as completely eliminating the long-term deficits of Social Security without tax increases or benefit cuts. That resulted because the personal accounts were designed to take over far more responsibility to pay future promised Social Security benefits than they took in payroll tax revenues, leaving the system in permanent surplus.

Polls reveal the utter failure of the administration's campaign for personal accounts. Surveys consistently show support for personal accounts at 50 percent or more. But when the public is asked about "the president's plan," support falls by half.

All is not lost, however. Support for the GROW accounts legislation surges in Congress, to stop the current annual raid on the Social Security surplus for other government spending.

Those surpluses would instead start small personal accounts for each worker, which would take over a proportionate responsibility to pay future Social Security benefits.

Over time, the personal accounts can be expanded, which would increase future benefits rather than cut them because of the accounts' higher market returns. Moreover, as the expanded personal accounts take over paying more and more future Social Security benefits, Social Security deficits would eventually be eliminated, achieving full solvency.

This proposal is political dynamite because it combines the extremely popular idea of ending the raid on the Social Security trust funds with the still quite popular personal accounts, without any tax increases or benefit cuts. Only by going to the people with such a populist proposal that clearly benefits workers can Republicans hope to overcome reactionary, Neanderthal, Democrat opposition to Social Security reform.

Peter Ferrara is a senior fellow at the Institute for Policy Innovation, and policy director at the Free Enterprise Fund Institute.