Money Matters: Retirement dilemma

Author: Harriet Johnson Brackey

Published: September 27, 2004

You know the saying that a politician is lying if his lips are moving?

In this campaign, it's what they're not saying about one of the major issues that's the problem.

If you've heard anything about Social Security at all, it was probably President George W. Bush at the Republican convention saying he wants to create private accounts within the Social Security system.

You can guess, then, that Sen. John Kerry is against privatization. He adamantly argued against the idea last week during a speech in West Palm Beach.

That's about the extent of the discussion about Social Security reform -- so far.

Pushing for major changes are forces in Congress and Federal Reserve Board Chairman Alan Greenspan.

''As a nation, we owe it to our retirees to promise only the benefits that can be delivered,'' Greenspan said last month. He called for ''recalibrating'' retirement benefits promised now. ``If we delay, the adjustments could be abrupt and painful.''

And the Kerry camp contains Clinton advisors who wanted to achieve reform at the end of his term.

As for the current president, ''It's a higher priority if Bush is elected than tax reform, than any other domestic issue,'' said Chris Edwards, director of tax-policy studies at the Cato Institute.

But we're left to talk among ourselves to figure out what these reform proposals are.

The details might make us shudder.

I wonder:

? What would privatizing or not-privatizing Social Security do to benefits? Can the 47 million people getting them today expect to receive them at the promised level forever? Would benefits be cut if private accounts are allowed?

? What's each candidate's plan for finding funding when the system begins to run out of money in 14 years? Or before?

? How would each candidate solve the long-term problem of too few young people paying in and too many older people absolutely dependent on taking out benefits?

Three workers per retiree last year, two by 2025, according to the Social Security Administration.

? What's the plan for when its trust fund is expected to be empty, in 2042?

OK, I'll give a moment's consideration to the idea that there's a good reason the candidates aren't answering these questions.

Economist Peter Orszag, who was a senior advisor to the Council of Economic Advisers during the Clinton administration, says putting out Social Security reform proposals during a campaign is ''a turkey shoot.'' Whatever is said becomes a slow-moving target easy for the other side to shoot down.

That propose-and-dispose game, Orszag said, could actually hinder reform efforts the next president.

''Both camps have pretty moderate people who are well aware of the issue,'' said Eugene Steuerle of the Urban Institute. ``But the dilemma at campaign time is that as a general rule, campaigns don't identify losers.''

A loser being something that isn't a gift the candidate can make to the electorate, he said. As in, Let Me Give You This Tax Break. A loser being a tough problem with a difficult solution, I suppose.

It's the losers we'll face, though.

Whoever gets elected with be slammed with the retirement crisis, and a few other harsh economic realities at the same time. In 2008, as that president finishes his term, the first wave of baby boomers will be eligible to claim Social Security benefits.

People haven't saved enough. They'll need that money.

Then there's the 2018 date at which workers' payments into the system will no longer equal benefits paid out.

That's when the government will need to find the money somewhere.

Raise payroll taxes? Increase from $87,900 today the maximum amount of income subject to Social Security taxation? Do something sooner, such as increase government debt?

Cut benefits?

Sen. Kerry ''sees the problem not as a Social Security imbalance but as an overall imbalance in spending too much as a whole; and the Bush tax cuts are too large,'' said Jason Furman, the Kerry-Edwards economic policy director.

``If we restore fiscal discipline, we don't need to cut benefits for our seniors.''

How would this work? Restore fiscal discipline, Furman reiterated.

Bush, whose campaign hasn't answered repeated requests for information, made Social Security reform a centerpiece of his last campaign.

''It goes with his idea of an ownership society,'' Steuerle said.

He set up a commission to look into reforms, but when its work was completed, he did not endorse any of its three proposals.

Where does that leave us? Cato's Edwards says he wants younger workers to be allowed to divert 15 percent of their Social Security taxes to private accounts.

But how can we afford that in a system slated to soon run out of money?

The non-discussion will make losers of us all. And still, the issue won't go away.