WSJ: Good Policy, Good Politics

Just as Democrats in Congress were congratulating themselves on turning back Social Security reform, a new proposal has dramatically changed the debate. The DeMint-Ryan plan, if passed into law, would mark a giant first step toward personal ownership of Social Security benefits. Moreover, it addresses the Democrats' main objections to personal accounts. We will now see, in other words, whether congressional Democrats have been debating the issue in good faith, or whether they have ulterior motives.

Announced last week by Sen. Jim DeMint, along with several influential House Republicans, the plan is based on the radical idea that our Social Security surplus should actually be set aside for Social Security. As it is, Social Security funds drawn from payroll taxes run a surplus of billions of dollars a year. This coming year it will exceed $80 billion, and before the great demographic shift of 2017 -- when baby boomers begin turning 65 -- the cumulative surplus will approach $2.2 trillion. In theory, that money is held in trust for future retirees. In practice, of course, the surplus is spent by Congress on programs great and small, turning what ought to be an asset into massive future debt.

Under the DeMint-Ryan plan, instead of just gobbling up the Social Security surplus, the government would, in effect, rebate each worker's share of the surplus in the form of voluntary personal accounts invested in U.S. Treasury bonds....

All along, Democrats have argued against personal retirement accounts on the grounds that they carry too great a risk to investors and that the transition to PRA's would come at too great a cost in additional debt. This plan, however, cannot be caricatured by Democrats as dangerous or reckless, since the risk of long-term investments in U.S. Treasury bonds is minimal....

Without reading the entire article (I don't have a login for wsj) and basing my opinion on just this piece of information, I think this would be a good first step. It should not be the ultimate destination but simply the first step in the direction we want to go.

I like the idea of removing SS money from the general funds and letting it build up year after year. At some point, I imagine that enough will be built up to finally allow SS to become a voluntary system. (meaning you can opt out if you choose)

I think the best part of this is that the Democrats have been insisting that the Trust fund was real, that it had treasury bonds in it, and that they were worth something.

All this proposal does is to put people's names on those treasury bills. If the bills already existed, how can putting names on them drive up costs to the government? (I know the answer, but) How can the democrats continue to say that the trust fund has money, if they have to argue that this bill will cause the government to borrow money?

I would rather have control over my money in my private account. But from the beginning I have been advocating a personal account scheme which allowed only treasury bills and only used the surplus. This is the "Lock Box" all the democrats talked about. We will have put the trust fund out of the reach of the politicians.

In 10 years, old people will see that the personal accounts don't effect them. And people with personal accounts will start asking for permission to do something with them. And then the argument won't be over whether we should HAVE the accounts, but rather how much control we want people to have over their own money.

I doubt the Democrats can afford to go with this plan, because they see where it will lead. But (And I assume this was Carl Rove Again) they were played like a fiddle. Months of insisting that private accounts were risky, being forced to come up with reasons to oppose them -- and then cut the legs out from under them.

The President's trip to the "trust fund" was a particular stroke of genius, since it made all the democrats come out and argue that the trust fund has treasury bills.

And his cross-country tour will now pay dividends, because he has planted the seeds.

The claim I have heard is that the American people are against reform. I have a feeling the vast public views SS as a small problem. Do they not see the big picture that in essence SS was and is a pyramid scheme? That it was never intended to earn enough income to provide for pensions, but simply hoped to take from the working and give to the retiring long enough that most wouldn’t notice what a mathematical failure it would ultimately become? Or are Americans just simply wanting to pretend it is not a problem and why not let the future generation deal with it? If it is the second, I find that a rather cowardly and immoral way to look at the issue. That’s why true conservatives believe in taking responsibility for their financial needs themselves and not damning future Americans for our mistakes.

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