Having read Jess Wilhelm's regurgitations of Paul Krugman's talking points and the ultimately unconvincing opinions of The Post's editorial board, it is time for some straight talk on Social Security.
Young people have become the government's workhorse; we are expected to docilely bear the burden of a public welfare program proliferated by politicians in order to shore up the senior electorate. As a young worker, I am calling on students to support Social Security reform.
Although this may sound like a concern for our grandparents, in this debate, the proper place for seniors is on the sidelines. Any reform that becomes law will not affect anyone born before 1950; today's retirees will live out their lives on the current system. To those raucous seniors and their propaganda machine, the American Association of Retired Persons, I say, step aside; this is our generation's issue. Permanent solvency of the system seems to be the focus of the day. However, there's a more important reason than insolvency to reform the system; young Americans of all economic levels should be in control of their Social Security money in an account that is their own.
Personal Retirement Accounts (PRA's) are the most appealing element of President Bush's ownership society. These voluntary accounts would help young workers like you and me build real assets for retirement that neither the government nor politicians can take away. By allowing you to put four or more percentage points of your payroll taxes in a personal retirement account, you get a trust fund with your name on it. From the first day you work, you become a member of the investor class, accruing real assets each payday with a substantially larger return at retirement than could be expected from the current Social Security system. Currently, you don't own your Social Security benefits. Therefore, they are not inheritable; you simply surrender the product of a lifetime of hard work to the government upon death. Many Americans are not able to pass anything onto their loved ones. Personal accounts would enable you to build a fund of real, inheritable wealth.
These accounts will be particularly beneficial to low wage workers living paycheck-to-paycheck. This echelon of society often barely scrapes by on just enough to pay their bills. Personal retirement accounts are one of the few ways by which low-wage workers can build a nest egg for their future. For this reason, they won the support of the late liberal Senator Daniel Patrick Moynihan who, in 2001, claimed that these accounts would help end wealth inequality. Though a conservative initiative, many on the left, including former President Clinton, have acknowledged that PRA's will do a great deal for the half of the population that owns virtually no assets.
For women, Social Security reform is also critical. Women live longer than men and typically have lower incomes during retirement. They take more time out of the workforce than do men and disproportionately work in jobs without retirement plans. Consequently, women depend on Social Security for a larger portion of their retirement than do men. Personal retirement accounts will empower young women to earn a substantial return on their payroll tax burden and ensure their financial independence in retirement.
Much has been made of the so-called transition costs to private accounts. Some say that creating accounts now would incur unacceptable debt; however, there is a fundamental flaw in their argument. There is a difference between borrowing to finance personal retirement accounts and borrowing to finance current government expenditures. The accounts are a real asset, so while we are borrowing on one side, we accrue real assets on the other. Although we increase a short-term deficit, we are actually reducing the nation's real indebtedness. The long-term shortfalls we face now will dissipate as young workers self-finance the lion's share of their retirement (i.e. permanent solvency). In short, it means that we fund now an unfunded liability to avoid larger debt in the future and ensure retirement security for young workers.
Some have argued against personal accounts by suggesting that they would involve insufferable risk. This is simply not true. An individual could opt to invest solely in risk-free government bonds, backed by the full faith and credit of the United States government. Or, one could carry minimal risk by investing in a corporate bond fund. Historically, the stock market hasn't failed to provide positive returns (around 6%) in the long term and even if returns were half of their historical average, younger workers would still be better off with personal accounts. To further lessen any risk associated with investing, one could choose life-cycle portfolios that automatically adjust the level of risk to an individual's age, so as he or she approaches retirement, his or her personal account would be weighted more heavily toward secure investments. The greatest risk involved with Social Security today is retaining the current system.
Social Security reform is by far the principal nation-shaping issue our generation will decide. This year, through action or apathy, young Americans will shape the future economic and social landscape that we will either enjoy or lament in our adulthood and retirement. I urge all young people to take action to reform Social Security and move our generation from the insecurity of government to the security of ownership.
-William Munroe is a freshman marketing major. Send him an e-mail at wm343504@ohiou.edu.
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Letter to the Editor
