October 26, 2004

Kerry Has No Social Security Plan

by Michael Tanner

Michael Tanner is the director of Cato's Project on Social Security Choice.

What would a political campaign be without a Democratic attack on Republican plans to destroy, dismantle or privatize Social Security?

It was only a matter of time until John Kerry trotted out this well honed campaign tactic. Now, Kerry has attacked President Bush for planning "a January surprise" that would "privatize" the government-run retirement program.

Setting aside semantic debates about the term "privatize," Bush's plan is hardly a surprise. The president has repeatedly said that he would allow younger workers to privately invest at least a portion of their Social Security taxes through individual accounts.

You can agree or disagree with that idea, but the president has not tried to hide where he stands.

On the other hand, Kerry has given us few clues as to how he would solve Social Security's looming financial crisis.

Social Security will begin to run a deficit -- spending more money on benefits than it takes in through taxes -- in less than 15 years, by 2018 according to the last report of Social Security's trustees.

The so-called Social Security Trust Fund, which is supposed to help pay benefits until 2042, in reality contains only government bonds, essentially an IOU. While few doubt that those benefits will ultimately be paid, the federal government will still have to find the money to pay them. Ultimately, Social Security's unfunded liabilities exceed $26 trillion. That's real money, even by Washington terms.

And what would John Kerry do about this? Mostly he tells us what he would not do.

"I will not privatize Social Security," he tells audiences. "I will not cut benefits."

Pressed further, he says he might offer unspecified "tweaks" to help the program. And, during the final presidential debate he indicated he might consider appointing a commission to study the matter.

As former President Bill Clinton pointed out, there are really only three options for Social Security reform: raise taxes, cut benefits or invest privately. Since Kerry rules out private investment or benefit cuts, he could legitimately be accused of implicitly endorsing tax increases.

And mighty big tax increases they would have to be, a 50 percent increase in the payroll tax or the equivalent. It would be a tax increase far higher than what Kerry would "save" by rolling back parts of Bush's tax cuts -- even if he hadn't already promised to use those savings to fund other government spending. And, contrary to Kerry's promises, it is a tax increase that would fall on workers earning less than $200,000 per year.

Not that financing is the only problem with Social Security. The program already provides today's workers with a low, below-market return on their taxes.

The program unfairly penalizes African Americans, working women and others. Workers don't own their money or have any guaranteed right to their benefits. In short, it is a program crying out for reform.

But Kerry continues to duck the issue.

That isn't good enough. No one should be running for president if he can't stand up and tell the American people what he plans to do about the looming Social Security crisis.

If Kerry plans to raise taxes to prop up Social Security, he should tell us. If he has another idea, he should share it with us.

If he believes that the current program, with all its problems, is the best we can do, he should say so.

But fear mongering is not a Social Security plan.

This article appeared in the New York Post, November 6, 2004.