Tread carefully

December 19, 2004

TACKLING AN overhaul of Social Security during the first, and potentially most productive, months of his second term is a daring and difficult mission for which President Bush deserves credit for gumption.

But he's either sugarcoating or ignoring entirely the bitter medicine that experts agree will actually be necessary to restore long-term solvency to the retirement program.

No one should be under the illusion that the younger workers Mr. Bush says he's trying to help are in line for a bonanza if they are allowed to invest a portion of their Social Security payroll taxes in personal stock-market-based accounts.

The thrust of that plan is to ease the government out of the guaranteed pension business. "Ownership society," as Mr. Bush uses the term, means master of your own destiny.

In effect, he wants to encourage individual squirrels to gather and store away their own nuts for the winter rather than relying on the government to do it for them.

That philosophy didn't work too well, though, before 1935, when Social Security was created to provide a safety net for the huge portion of elderly citizens - mostly widows - who were living in poverty.

Maybe the times are different now, and Americans are so much more sophisticated about finances that with a little push they can take control of their own retirement nest eggs.

But the pitiful national savings rate suggests that isn't the case. And workers shouldn't be left to roll the dice on the stock market without some kind of protection.

So-called privatization alone won't put the popular program on sounder financial footing, anyway. As Mr. Bush said, the problem is simply that within the next few decades there won't be enough younger workers to pay for the benefits promised to older ones.

Either more money has to come into the system, or less must be paid out. Private accounts could eventually reduce the government cost of Social Security benefits, but in the short run, the government would have to pay $1 trillion to $2 trillion more to make up for contributions diverted away from today's retirees.

And yet the president has ruled out raising the payroll taxes and has promised no benefit cuts for workers at or near retirement age. What's more, he pledged to reduce the federal budget deficit in order to shore up the dollar - which is a good idea, but one that seems impossible to square with his plans to borrow the $1 trillion to $2 trillion cost of transitioning to private Social Security accounts.

So it's admirable that Mr. Bush would rather confront Social Security's shortcomings now than pass the problem along to future generations. But if he botches the job, he'll be doing them no favor.

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