Though he gave it his best shot, President Bush failed to overhaul Social Security. Even so, his efforts have brought at least one lasting benefit. Social Security reform is now part of our national discourse, whereas before it was almost impolite to bring it up. Politicians can now discuss the issue without fear of touching the third rail of politics. Now that the issue is out, and given that the challenge of unfunded entitlements continues, presidential contenders need to tell us their vision for the future of Social Security.
In so doing, candidates will likely adopt one of three political strategies to position themselves as thoughtful stewards of our retirement, without subjecting their campaigns to risk. Two of the strategies are time‐tested. The third is not, but it may offer the best opportunity for victory.
The first, and most common, strategy is that of the monkey: See no evil, speak no evil. Candidates who adopt this strategy hope other events will crowd out Social Security reform, and they certainly won’t bring it up.
The second strategy is that of the elephant: When in danger, head for tall grass. Politicians who follow this path understand Social Security is fundamentally flawed, financially unsustainable and will eventually be unable to provide scheduled retirement benefits. Their overriding objective is to preserve the system’s tax‐based financing and government‐determined benefits. These candidates will encourage us to believe Social Security is the most successful government program ever and that it provides guaranteed and risk‐free income.
The third strategy is that of a leader, a unique and unusually gifted character who understands Social Security’s overarching challenges and what’s at stake. This leader wants to be president so he can change the future; he won’t change his views because he wants to be president. He knows if elected he’ll probably be responsible for reforming Social Security. He also understands he has a responsibility to tell the American public beforehand what he’ll do if elected.
First of all, he’ll spell out the three principles of reform that will guide him. The first is that any reform must ensure that the elderly are able to retire with financial security and dignity. The second is that younger workers will be able to keep more of the fruits of their labor. And the third is that any reform must benefit, not burden, the economy. Under his plan, no one will be required to leave Social Security but everyone will be allowed to. Every American will be given this freedom to choose.
For those who elect to leave, a little less than half of their present payroll taxes will no longer be paid to the government but rather saved for themselves, in accounts of their own, over which they will have property rights. These savings will be invested in highly diversified portfolios of wealth‐producing assets designed to meet their retirement needs. People would be able to make choices, taking the reality of risk into account while achieving necessary investment returns.
Upon retirement, everyone will be able to purchase an annuity that guarantees a monthly check for the rest of his life, sheltering him from market and mortality uncertainties. He could receive additional retirement income with the remaining assets, or leave them to his children, or bequeath them to any person or organization he chooses. Everyone would be free to make these decisions.
Over time, the government’s retirement benefit obligations would decline, as we provided more for ourselves from our accumulated wealth. With just a 5 percent saving rate, our retirement income would be greater than the government’s scheduled benefits — let alone those that can be financed by projected payroll taxes. We will also have saved our children and our grandchildren from liabilities they simply could not afford.
Under this plan, over time, Americans will depend less on the government and more on themselves. Relieved of their unnecessary tethers to the state, they’ll be able to make more choices about their lives.
The clever candidate should bypass Congress, and sell his platform directly to the American people. If the people want these freedoms, they’ll demand them from their representatives. This candidate will tell voters what the future holds both with and without reform, explaining the risks and rewards of each. He should ask them if they want the freedom to choose how to prepare for their retirement. He should ask them if they want to determine their future or if they want the government to decide. He should tell them, in no uncertain terms, his vision for the future of Social Security.