In an effort to court senior citizens in the final few weeks before the 2004 election, opponents of Social Security reform have begun their usual scare tactics. Last week (9/21), Democratic presidential nominee John Kerry charged that President Bush's plan to allow younger workers to establish private accounts would generate a $940 billion windfall to the financial services industry while cutting benefits for senior citizens. The New York Times editorial board got in on the act as well, saying that the private accounts option would result in reduced benefits and less reliable incomes for retirees.
President Bush has done a fair amount to advance the cause of Social Security privatization. To the surprise of many, he first raised the issue during the 2000 presidential primaries and he advocated private accounts during his acceptance speech at the 2000 Republican convention. Upon taking office, he created a bipartisan commission to explore Social Security reform options, including private accounts. And, at last summer's 2004 Republican convention, he again pushed the idea of private accounts as part of his "Ownership Society" initiative.
Unfortunately, if history serves as any indication, Bush will probably choose not to engage Kerry on the issue in the final, heated weeks of this year's campaign. In general, when reform supporters are confronted with such scare tactics, they back down and pledge to uphold the current system. Such a response may be effective at deflecting criticism, but it does considerable damage to Social Security's long-term prospects.
Indeed, Social Security is going to require some sort of major overhaul in the near future simply because it is not financially viable over the long term. But before any sort of meaningful reform can occur, people need to hear various ideas debated for a number of years. If reform supporters insist on dodging the issue, those important discussions will never take place.
Clearly, supporters of private accounts need another strategy. One way to do this is to raise the stakes in the debate, both figuratively and literally. This could be done through a wager. For instance, President Bush could make the following proposal to Sen. Kerry:
Take two workers, each earning an identical income. One will be allowed to invest 2 percent of his income in a private Social Security account. The other will have to place the same amount of money into the current government-run system. After a specified amount of time, analysts will calculate the amount of return each worker would have received on his investment. If the worker who kept his money in the traditional Social Security program would come out ahead, Bush will pay Kerry the difference. Likewise, if the reverse happens, Kerry would pay Bush the difference.
Such a wager could change the dynamics of the debate on Social Security reform. Suppose that Kerry refused the wager. He would then rightly face criticism for refusing to believe his own sound bites and having little faith in his own policy proposals. However, if Kerry accepted the wager, the private accounts would surely come out ahead in the long run. That would visibly demonstrate the benefits of private accounts in a way that is easy to understand and would advance the prospects for reform.
Such a wager would dramatically advance the long term prospects of reform. For once, it would put reform proponents on the offensive on the issue. It also would facilitate debate and discussion as people could see the tangible benefits of private Social Security accounts. Finally, at least one prominent opponent of reform would be left with fewer resources to make his misleading accusations around election time.