Commentary

USA Accounts Won’t Work

By Andrew G. Biggs
This article appeared on Roll Call on May 6, 2002.

Morton Kondracke is right to seek compromise on Social Security but wrong to place his hopes on the Clinton administration’s supplementary “USA Accounts,” for these accounts do nothing to help Social Security. Personal accounts as part of the program increase saving now in order to lessen the tax burden in the future. USA accounts, whatever their merits, leave future Social Security burdens entirely unchanged. Moreover, while USA accounts might “cost” less in the short run, their long-run benefits are much less as well.

Proposals from the President’s reform commission constitute a real compromise. The commission’s plans incorporate accounts, as desired by the President (and 72 percent of Americans aged 18-64, according to a recent Gallup poll). However, these accounts would be voluntary, and everyone aged 55 and over would be completely protected against any changes whatsoever (despite election-year rhetoric to the contrary). Moreover, the commission’s plans contain valuable new protections: minimum wage workers would be guaranteed to retire above the poverty line; lower-wage widows would see substantial benefit increases; and account assets would be split evenly between divorcing spouses.

The Bush commission’s plans are not everything the left would like, but go a long way toward addressing their legitimate concerns. Account opponents, on the other hand, make no effort to bridge the gap with the majority of Americans who want the opportunity to own and invest a portion of their Social Security taxes.

Andrew G. Biggs is a Social Security analyst and assistant director of the Cato Institute’s Project on Social Security Choice.