The American Spectator

The Public Policy

WASHINGTON -- President Bush recently urged Congress to move on Social Security reform. The President deserves a lot of credit for pushing this issue as much as he has. Late last year, in talks with some conservatives and libertarians, one could hear doubts about whether Bush would actually make reform a priority. He has since removed all doubt, and reformers should, for that at least, be grateful.

Unfortunately, reformers lost round one of the debate. Bush's renewed emphasis on the issue makes it a good time to consider why we lost and how we can do better in round two.

The first reason we lost is that too many of us focused on what the Cato Institute calls the "Green-Eyeshade" aspect of the debate. (I plead guilty, and guilty, and so on.) We harped on accounting terms like solvency, present value, price indexing, and transition costs. We even got sidetracked on a debate over whether there was a crisis. There was really no reason for this -- most polls already showed that about 70% of the public thought Social Security either faced a crisis or major problems. We didn't need to make the case that something needed to be done when a vast majority of the public already agreed. Instead, we need to emphasize terms like ownership, control, and choice. Our arguments should focus more on the fact that with personal accounts, workers will own their Social Security money. We must also stress that they will have more control over their Social Security because they will have more choices about where to invest that money.

The second reason we failed is that we took a comprehensive rather than piecemeal approach to reform. In doing so, we kept supplying ammo to the opposition. By focusing on changes to the benefit formula like progressive indexing, we enabled them to scream, "Benefit cuts!" By focusing on transition costs, we enabled them to scream, "Deficits and debt!"

If we take incremental approach to reform, we can win round two. There are three pieces to achieving reform: establishing personal accounts, financing the transition, and changing the benefit formula. They should be taken in that order.

By first establishing personal accounts, we give the American worker something to own. With the account, he will see first hand what reform means: ownership of his Social Security money. This can be done in such a way as to put the other side on the defensive. "Democrats want to squander the surplus -- we want the American people to own it. They want to spend your Social Security money. We want you to be able to save it."

In this first step, there are no changes in benefit formulas that enable the other side to raise the specter of benefit cuts. It also avoids any tussles over transition costs since it does not add anything to the national debt.

Once Congress has established personal accounts, it will be much easier to sell transition costs and changes to the benefit formula. Persuading account holders to endure transition costs will be a snap once they know that those costs will mean more money in their personal accounts. The same goes for altering the benefit formula. Assuming that it is easier to give up something if you are familiar with what you are getting in return, it shouldn't be a difficult sell to show account holders that reducing the traditional benefit is necessary to keep the system going.

Senator Jim DeMint's reform achieves most of this. However, it has a benefit offset for those accepting personal accounts, which leaves it vulnerable to the charge of benefit cuts. The President should consider backing the DeMint plan, with the condition that the benefit offset is dropped for the time being. Combine that with a campaign that focuses heavily on the ownership, control, and choice aspects of the DeMint plan, and reformers can win round two.

topics:
Social Security, NATO