Contending voices

Author: Don Erler

Published: April 26, 2005

U.S. Rep. Mike Pence, R-Ind., an enthusiastic supporter of President Bush's desire for personal retirement accounts in Social Security, and David Certner, a powerful AARP opponent of such accounts, agreed at a conference last week at the Heritage Foundation that Bush is hard to beat.

Said Pence: "I have learned never to underestimate the persuasiveness of this president," especially "when he has a bill under his arm and says, 'There's the hill [to take].'"

Certner agreed that Bush nearly always gets some of what he works to accomplish. That's why AARP is "still looking for something to come out at the other end."

While I was in the nation's capital on a fellowship from Heritage, I heard policy wonks from across the political spectrum engage reporters, columnists and Internet bloggers on both the broad principles and bedeviling details of the impending entitlement crisis. Two days of intensive seminars on "bend points," "clawbacks," "blended indexing" and the relative merits of "carve-out" vs. "add-on" personal retirement accounts helped me appreciate the mind-numbing complexity of entitlement reform.

I was surprised at the near-unanimity on the scope of the problem. Although Certner and Heidi Hartman, president of the Institute for Women's Policy Research, argued for changing the present system as little as possible, everyone agreed that a demographic tidal wave will require substantial modifications in Social Security and Medicare.

Heritage's Bill Beach said: "We are on territory that nobody has walked on before." A startling datum: 70 percent of all people who have ever lived are among us today. And in the developed countries, these people are living longer than any cohort in history.

American baby boomers and their offspring, thanks to increasing average life expectancies, will find only 17 percent more workers to support the doubled number of retirees by 2050. If an unreformed system attempts to keep all existing promises to them, little public money will be available for education, courts, transportation, environmental protection and myriad other domestic programs.

The Urban Institute's Gene Steuerle conceded that if this scenario is to be avoided, taxes will have to increase by 50 percent or benefits will need to be cut by a third. And Joseph Antos of the American Enterprise Institute noted that the cumulative projected deficit for Social Security and Medicare will be $400 billion larger than the entire federal deficit over the next decade. As he quipped, "the undead are going after the unborn" to sustain their coveted entitlements.

What to do? Also surprising: All panelists agreed that increased retirement savings can eventually reduce the drain on public resources. The more liberal panelists wanted such savings to be outside Social Security, such as expanded IRAs or 401(k)s.

Richard Jackson, director of the Global Aging Initiative at the Center for Strategic and International Studies, suggested that personal retirement accounts should be a mandatory "add-on" within Social Security.

And the libertarian and conservative panelists preferred personal accounts as a voluntary "carve-out" within the existing program. That is, they want payroll taxes to fund these private accounts.

One area of sharp disagreement: Conservatives and libertarians supported "means testing" (providing benefits for those who actually need them) in entitlements for the elderly, which the more liberal panelists unanimously opposed.

So despite Pence's and Certner's respect for the president's determination, compromise will be difficult to achieve. The Cato Institute's Mike Tanner said that Democratic congressional leaders have threatened withdrawal of campaign funding and the threat of primary opponents for members who support personal retirement accounts.

And Pence, who resigned a position on the Republican whip team to assume leadership of the Republican Study Committee (its 100 conservatives constituting the largest such group in Congress), predicted that personal accounts "could pass the House" in a close vote.

But the Senate is more doubtful. Quipped the lawmaker, "I would sponsor a NASA probe to the Senate," in which soil samples could help answer the burning question: "Was there ever life there?"