« Yes, Personal Accounts Are About Dismantling the Welfare State | Main | Today's Morning Headlines »

March 10, 2005

Cato's Daily Debunker

From the Cato Institute: Sen. Lindsey Graham has lashed out at President Bush and the GOP's emphasis on personal retirement accounts as a way to fix Social Security.

"'We've now got this huge fight over a sideshow,' Graham said during a meeting with Washington Post reporters and editors. 'It's always been a sideshow, but we sold it as the main event. [Critics are] attacking it as the undoing of Social Security. That's what frustrates me -- that we're off in a ditch over a sideshow, and there's plenty of blame to go around.'"

To call personal retirement accounts a "sideshow" is to miss completely the point about Social Security reform. Personal retirement accounts aren't a "sideshow." They are the main event. The point of this entire debate, which Sen. Graham appears to have no grasp of whatsoever, is that Americans have no ownership rights to their Social Security benefits. Creating personal retirement accounts would allow people to own their Social Security benefits and choose whether or not they wanted to invest in stock or bond funds with the promise of higher returns on their investment, and consequentially, enjoy a more secure retirement. It should be noted that Sen. Graham and his staff already have the option to invest in these stock and bond funds under the Thrift Savings Plan. Without personal retirement accounts, Social Security reform simply becomes a question of whether Congress will increase taxes or cut benefits. And that is really no reform at all. As the Cato Institute's Mike Tanner wrote in a recent op-ed, titled "The Point is Ownership":

While solvency is important, the goal of Social Security reform should be more than to just balance the books. We should be trying to provide workers with the best possible retirement options, and this involves giving them more control and ownership of their retirement funds. Under the current dispensation, once a worker pays his or her Social Security taxes into the system, the worker no longer owns that money. This is a very paternalistic arrangement, in which the daddy government doesn't trust the kids to control their own money. One of the most enduring myths of Social Security is that a worker has a legal right to his or her Social Security benefits. Most workers assume that because they pay Social Security taxes into the system their whole working lives, they have some sort of legal guarantee to its benefits. They assume wrong. In two landmark cases, Flemming v. Nestor and Helvering v. Davis, the U.S. Supreme Court ruled that workers have no right to receive Social Security benefits. Congress and the president may change, reduce or even eliminate benefits at any time. Retirees must depend on the good will of 535 politicians to determine whether and how much they will receive in retirement. Where is the dignity in such a system? In fact, Congress has already voted to reduce Social Security benefits. For example, in 1983, Congress raised the retirement age. Given the system's looming financial crisis, additional benefit cuts and/or tax increases are a mathematical certainty.

Take personal retirement accounts off the table, or call it a sideshow, and you are really just talking about tax increases and benefit cuts. Or as they refer to it in Congress, business as usual.

Posted by Andrew Roth at March 10, 2005 8:54 AM | Print

Trackback Pings

TrackBack URL for this entry:
http://www.socialsecuritychoice.org/cgi-bin/mt/mt-tb.cgi/5139