I heard a bit of “Meet The Press” while running errands this afternoon (the audio is replayed on WSB 740AM in Atlanta). Tim Russert was quizzing–actually badgering–Mitch McConnell about the proposed personal savings accounts in Social Security. Russert’s question was (paraphrasing), ‘Okay, the president is proposing these accounts, but what do they have to do with the Social Security solvency problem?’
McConnell’s answer wasn’t very good. He basically repeated the well-known argument that you can make more money in the markets over time than you can relying on Social Security’s “return” (actually a government-set entitlement payment, not an actual return on an investment). As Rich Lowry notes, McConnell should have been more up-front about all the issues involved. Lowry’s suggested answer isn’t bad, but here’s what I would have said, if I’d been able to possess McConnell for a couple of mintues:
Look, Tim, Social Security is never going to be as good of a deal for today’s young people as it was for their grandparents, or even their parents. With people living longer, and fewer younger people having been born to pay into the system, the demographics just won’t allow it, and we’re coming up fast on a time when there simply won’t be enough money available to pay out like we’ve been paying out for the last several decades.
The time is going to come–and we can argue about when this will be, but it is going to happen one day–when we can’t keep the old promises any more without either cutting benefits, or having a huge tax increase, or realistically, doing both. That’s a pretty rotten thing to do to people who’re paying money out of their paychecks every day to support the current system, and reasonably enough think they ought to get a decent return on their money.
What private accounts can do, but the pay-as-you-go system can’t, is grow the pot of money available for people to retire on. The government can’t grow money, all we can do is tax or borrow, but the market can. With a private account that’ll grow for the next 35 years, a 30-year-old will have a cushion against the benefit cuts that will have to happen at some point in their lives–not tomorrow, not next year, but someday–to keep the government from going broke and their taxes from growing to Swedenesque levels.
We can’t tax ourselves out of this problem. There aren’t going to be enough people to tax. But we can use time and the market to give people a fair shake. We just have to start now, or the situation is only going to get worse.
I understand why McConnell (and Bush, for that matter) aren’t saying things like that: they think the Dems will jump on any reference to benefit cuts or tax increases to make 30-second ads and demagogue the issue. And what the hell, they’re probably right. But if they’re going to be serious about fixing this train wreck, they’re going to have to start talking seriously about the realities of the situation, and trust the people to understand what’s going on when the other side chooses to stick its fingers in its ears ignore those realities altogether, a la Kevin Bacon in Animal House.
All is not well. Making money in the markets takes time, and every day this situation doesn’t get fixed, we’re all getting worse off.