Bush to Geezers: Save Yourselves!
On Social Security, the president says to throw the kids overboard.
In his State of the Union address, President Bush claimed, for the first time during his presidency, to be asking Americans to sacrifice. The man who told the country, and the government, that the patriotic way to respond to 9/11 was to spend lots of money now says he wants the nation to be more penurious. Think of the children, Bush said, "on issue after issue," but especially with regard to Social Security. The president painted his plan to alter the Social Security system as a grand bargain in which the current generation of older Americans, like parents saving for their children's college tuition, would forgo some small benefit so that the next generation could reap huge rewards.
Sounds terrific. Except what Bush proposed is actually the exact opposite: His plan would allow the current generation of retirees and near-retirees to keep the current system, the one where they receive far more money than they put in during their lifetimes, while requiring the next generation to subsist on their own earnings for retirement. This isn't the equivalent of parents saving for Johnny's 529 plan. This is Mom and Dad asking Johnny to invest part of his allowance so that they won't have to bother with paying for college. You could call Bush's idea the Screw Your Grandchildren Act.
Here's how it works: Everyone 55 and up gets to stay in the current system. Everybody else gets their benefits cut. Bush was startlingly blunt about this, saying, "I have a message for every American who is 55 or older: Do not let anyone mislead you; for you, the Social Security system will not change in any way. For younger workers, the Social Security system has serious problems that will grow worse with time." Bush then listed off a bunch of benefit cuts that have been proposed by Democrats in the past: "indexing benefits to prices rather than wages," "increasing the retirement age," "discouraging early collection of Social Security," and "changing the way benefits are calculated."
The difference is that Tim Penney, Bill Clinton, John Breaux, and Daniel Patrick Moynihan proposed making those changes for everyone in the system, including people already receiving, or about to receive, checks. Bush has made the politically ingenious innovation of telling the politically influential baby boomers and current retirees that they need make no sacrifices. They can keep collecting and cashing the checks sent to them by today's young workers. And then, in the ultimate act of generational self-indulgence, they can change the benefit calculations so that those young workers will get far less when they retire.
The sweetener for the next generation is supposed to be the creation of personal investment accounts. And it's true, an account that can be bequeathed to your children and grandchildren sounds attractive. But it's only more attractive than the current system if you die before the account runs out, and if the account ends up being larger than the amount of money you would receive under the current system. After all, under the current system you can put your Social Security checks in an account and bequeath them to your children and grandchildren that way, if you want.
For the first time, Bush and his administration have conceded that personal accounts have nothing to do with fixing the solvency of Social Security. (At a Wednesday background briefing for reporters, an anonymous senior administration official called it a "fair inference" when a reporter asked if "it would be fair to describe this as having—the personal accounts by themselves as having no effect whatsoever on the solvency issue?") Instead, personal accounts are just a clever way to reduce the Social Security system's progressivity. Higher-income people will get to keep a greater chunk of their own money than they do now. Lower-income people will have to get by with less.
But that scenario won't play out until the people who vote, the boomers and the retirees, are long gone. Politically, the idea of screwing your grandchildren is brilliant. Generations of lawmakers have known that younger people, much less future generations, don't vote. But Bush must be the first politician to propose screwing your grandchildren while executing a move I like to call the "straight-talking pander." Howard Dean and John McCain are the best-known practitioners of the straight-talking pander, which occurs when a politician tells an audience he is about to speak an unpopular truth but then proceeds to tell the audience exactly what it wants to hear.
This was the Greatest Love of All speech, in which Bush asserted that The Children Are Our Future. But before you sign on to Bush's proposal, be aware that what he's offering is pretty tough love.