On Social Security: The Washington Post Gets It
Jack Kemp reports on the growing bipartisan push for Social Security reform, from the Washington Post…
For example, on August 14th, 2004, the Post editorialized that, “Mr. Bush’s sympathizers are right that Social Security privatization could reduce long-term deficits, and right that the nation should not be deterred by the transition costs.” The Post also discarded the class-warfare mantra that has consumed Democratic candidates and party loyalists for so long by reasoning that: “Privatization could also stimulate economic growth, boosting tax revenues and so strengthening the nation’s fiscal prospects via a second route.” They continued, “Private accounts would boost national savings” thus “savings would become more plentiful,” which, in turn, would “stimulate extra corporate investment and growth.”
The Washington Post editorial writers realize that Social Security, as it currently stands, is the “risky scheme.” The government can at any time raise taxes or cut benefits. Moreover, workers born after 1960 are expected to receive a real rate of return on their payroll-tax contributions of less than two percent. Alan Greenspan stated this in 1999; his estimate likely was generous. This measly return is not a fair deal for retirees — today or in the future — and is particularly bad for low-income people of color. Even workers who put their money in standard government-insured savings accounts will earn higher returns than the current Social Security system can provide.
The Washington Post has now followed up on that original piece with an even more promising editorial this week. This week’s piece entitled, “The Cost of Reform,” observed that creating personal retirement accounts without tax increases or benefit cuts would require “issuing perhaps $2 trillion in extra bonds over the next generation or so,” but added that the creation of these accounts “would generate an equal and opposing transition benefit” thus “the net transition cost should be zero.” Ditto for the effect on interest rates and the dollar. As the editorial makes perfectly clear, “Government borrowing would increase, but private saving would increase equally.” In other words, net national savings would not suffer. In fact, net national savings can be expected to increase, especially if personal accounts are accompanied by tax reforms.
Hat tip Tech Central Station