Bush offers no good reason to gut Social Security

During the recent White House conference on domestic economic policy, President Bush mistakenly warned of the imminent collapse of Social Security.

While almost everyone agrees that steps must be taken to strengthen Social Security for the future, the system is in no immediate danger of going broke.

The tax and benefit revisions spearheaded by Alan Greenspan in 1982 extended the financial health of the program. According to the Social Security trustees, without any changes, Social Security will be able to pay 100 percent of benefits well into the 2040s and over 70 percent of promised benefits after that. The bipartisan Congressional Budget Office extends the date of full solvency to 2052.

Paying only 70 percent of promised benefits, however, is not acceptable. Relatively modest changes in trust-fund income — such as raising the limit on the payroll tax or investing in securities other than U.S. Treasury bonds — or small reductions in promised benefits can eliminate the shortfall projected to occur in 2042. But there is no reason to gut the Social Security program in the name of a nonexistent crisis.

Social Security is both a retirement and an income-protection plan that has met all that it has promised for almost 70 years. It has kept tens of millions of senior citizens off the poverty rolls. It has provided basic income protection for millions of spouses and dependents of disabled or deceased workers. It is the most successful domestic program in our nation's history. Since 1935, it has been America's only guaranteed source of retirement income.

The notion that siphoning off billions of dollars per year through private accounts will somehow help improve Social Security solvency makes absolutely no sense. It is as sensible as claiming that reducing the gasoline tax will provide funds for a tunnel to replace the Alaskan Way Viaduct.

Diverting Social Security funds into private accounts would require massive borrowing to fund payments to current beneficiaries, estimated at $2 trillion. Often not mentioned is that such private accounts also require drastic cuts in payments to future beneficiaries of Social Security, whether or not they opt for private accounts.

Substituting price-indexing for wage-indexing of Social Security benefits, as proposed by a White House commission would, over time, cut benefits by about 50 percent from current promised levels. Young people would suffer only a 30-percent cut in benefits if we did nothing. And they dare to call price-indexing "reform"?

Empowerment and wealth creation are worthy goals. Personal retirement accounts are excellent ways to achieve those goals, but only if individuals fund them in addition to — not in place of — Social Security.

Only Social Security provides a guaranteed, inflation-protected benefit that no one can outlive. Let us not risk these guarantees for the get-rich-quick promise of private accounts drained from Social Security income.

The only guarantee you can count on with private accounts is that they can lose money just as fast as they can make it.

As a nation proud of honoring its commitments, our commitment to the well-being and dignity of people as they age must be paramount. Social Security is a benefit and a promise worth fighting for.

Bill Iulo of Bainbridge Island is a former professor of economics from Washington State University, and a former member of AARP's National Legislative Council.