Looking for a "big issue" in the upcoming presidential campaign? Howabout Social Security? Composing roughly 23 percent of the federal budget,Social Security is not just the largest U.S. government program but the largestgovernment program in the world. Social Security affects nearly everyAmerican in some way. Approximately 40 million seniors receive SocialSecurity benefits, and all American workers must pay 12.4 percent of theirincomes into the program. Indeed, nearly 80 percent of American workerspay more in Social Security taxes than in federal income taxes. For most low-and middle-income families, the Social Security payroll tax is the largesttax they must pay. How is that for big?
The candidates need to pay attention to Social Security. The program isfacing insolvency. Just 15 years from now, in 2014, Social Security willbegin running a deficit, spending more on benefits than it takes in throughtaxes. At that point, the IOU-filled trust fund not withstanding, SocialSecurity will be forced to either increase taxes or cut benefits.Moreover, even if Social Security could pay all its promised benefits, most youngworkers would receive a poor, possibly negative, rate of return on theirtaxes. That is, they will end up paying more in taxes than they receive inbenefits.
There are other problems with the current Social Security system as well.The program contains a number of inequities -- it penalizes the poor,minorities, and working women, among other groups. Social Securityprevents low-income workers from accumulating of real wealth. And, according to theSupreme Court, workers have no legal right to their benefits. That meansthat, after a lifetime of paying Social Security taxes, a person mustdepend on the whims of politicians for his or her retirement income.Here is a summary of where the candidates stand on fixing those problems:Steve Forbes has put forward what is perhaps the boldest and most farreaching proposal. Forbes would use general government revenues toguarantee benefits to the currently retired and those nearing retirement,while allowing younger workers to redirect a portion and eventually "thebulk" of their Social Security taxes to individually owned, privatelyinvested accounts. Forbes would thus largely "privatize" Social Securityalong the lines of the successful program pioneered in Chile and copied bya number of other countries, including Britain and Australia.
George W. Bush has promised to make Social Security reform his topdomestic priority and said that he would be willing to "spend political capital" tomake reform happen. He has not spelled out the details of his plans forreforming the program but has said that he supports "some form ofprivatization or personal accounts." In his standard stump speech, Bushsays that "we should trust Americans by giving them the option of investingpart of their Social Security contributions in individual accounts."
Like Forbes and Bush, John McCain also supports "allowing workers toprivately invest a portion of the dollars they would otherwise pay thegovernment in payroll taxes." However, like Bush, McCain has not developeda detailed proposal. In various informal remarks, he has suggested thatthere should be a national debate on the degree of privatization. The odd man out on the Republican side is Gary Bauer who opposes any formof privatization and defends the current Social Security system as "a goodprogram." This has led to the strange spectacle of Bauer, a conservativeRepublican, appearing before liberal groups such as the AmericanAssociation of Retired Persons (AARP), and echoing the Democrat's charges that otherconservative Republicans will "destroy" Social Security. Bauer's ownproposal calls for a temporary reduction in the payroll tax today, followedby tax increases and benefit cuts in the future.
On the Democratic side, Al Gore has staunchly opposed privatization.Although others in the Clinton administration have sometimes flirted withthe idea of individual accounts, Gore has consistently opposed them. Gorehas not put forward a plan of his own, but presumably, he supports theClinton Administration approach of using general revenues to shore up thecurrent program and possibly allowing the government to invest a portion ofthe Social Security surplus in private markets.
Bill Bradley often talks about his interest in "big ideas," but he hasbeen largely silent on the issue of Social Security. He has said that he is"skeptical" about privatization but has not totally removed it from thetable. This is not surprising since one of Bradley's key supporters isSen.
Bob Kerrey of Nebraska, perhaps the most articulate Democratic advocate ofprivatization. However, Bradley's "big idea" appears to be encouragingeconomic growth which he hopes will generate enough revenue to support thecurrent system.
Polls consistently show that most voters support Social Securityprivatization. A recent Zogby poll showed that by a two-to-one margin,voters were more likely to support candidates who advocated privatization.Among Republican primary voters, the margin was closer to three-to-one, buta majority of Democrats also supported privatization. In a campaign crying out for big issues, there are few bigger than Social Security. Before people vote, they should find out where their candidate stands.