Opponents of President Bush’s proposal to make individually owned personal retirement accounts a part of the Social Security program routinely charge that it is motivated by ideological animosity toward the values Social Security is supposed to embody, such as equality and social cohesion. However, a frank look at the Social Security status quo reveals that the program is very poorly designed to realize liberal ideals. Social Security has a barely progressive overall structure, if it is progressive at all. The huge volume of transfers inherent in the system accomplishes very little income redistribution within generational cohorts. Furthermore, it works to the disadvantage of current workers, who will receive a smaller “return” on their payroll taxes than do current retirees. The terms of the imaginary “compact between the generations” are manifestly unfair.
What is worse is that the Social Security status quo embodies a government‐perpetuated deception designed to generate its own political support by misleading voters into believing that their payroll taxes entitle them to later benefits. The architects of Social Security created a structure and accompanying rhetoric that were specifically intended to encourage the false belief that the system provides a kind of insurance, similar to private insurance based in contract and property, and therefore involves a binding entitlement to benefits.
However, there is no justification for this deception on contemporary liberal grounds. The persistent intentional misrepresentation— the “noble lie” — embedded in the structure and language of the Social Security system is in fact antithetical to the ideals of transparent government, open democratic deliberation, and equality among citizens — ideals at the core of contemporary liberal thought.
A system of personal retirement accounts plus a means‐tested safety net would serve the “social insurance” function better than the Social Security status quo according to liberal standards. Contrary to critics of reform, personal retirement accounts would materially enhance equality and social cohesion by more fully integrating workers into the market, providing everyone with a stake in its growth, closing the gap between the investing and noninvesting classes, and making more salient the mutuality of interests in a market society.