"THE CRISIS IS NOW," President Bush declared of Social Security at the economic conference called by the White House last week. The president's language may have been a bit hyperbolic -- the funding shortfall in Social Security is big but not insurmountable, and in any event Medicare is a far more daunting problem -- but his fundamental point is sound. However dire your view of the Social Security situation, it's far better to deal with the problem now than wait until it's bigger and therefore more difficult to address.
But whatever credit the president deserves for calling on Congress and the country to deal with Social Security, he loses with his breezily dishonest suggestion that private accounts provide a painless, magic-wand solution to the program's woes. At the economic conference, Mr. Bush restated his gauzy "principles" for Social Security reform: Those at or near retirement age won't see their benefits cut, payroll taxes won't be raised and younger workers should be allowed to put some of their payroll taxes into private accounts. Protecting current beneficiaries is only fair. But the president's second two principles are less useful guideposts than irresponsible evasions of the hard choices facing those who would solve the funding problem of Social Security.
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There are many potential benefits to private accounts, but Mr. Bush characteristically peddles them as an all-dessert, no-spinach Social Security panacea. How, exactly, would private accounts "solve" the Social Security funding problem? Mr. Bush doesn't say, and for good reason: In and of themselves, they don't -- and indeed, they could actually make matters worse. As a way to address the Social Security funding gap, private accounts make sense not least because they offer a wedge for other benefit cuts. For example, the leading private-account proposal of Mr. Bush's Social Security commission requires deep reductions in guaranteed benefits. As Comptroller General David M. Walker, the head of the Government Accountability Office, put it in a speech last week: "The creation of private accounts for Social Security will not deal with the solvency and sustainability of the Social Security fund." Mr. Bush somehow omitted this unpleasant fact in his discussion.
Mr. Bush's move to put payroll tax increases off the table is emblematic of his allergy to tax increases for any reason, but it is ill-advised -- particularly if he means to rule out any hike in the payroll tax ceiling, the maximum amount of income on which workers must pay Social Security tax. The payroll tax is regressive, and raising the ceiling would call for additional contributions to Social Security from those who could better afford it -- and who reaped the biggest benefit from Mr. Bush's income tax cuts. Some proponents of private accounts, like Sen. Lindsay Graham (R-S.C.), have proposed raising the payroll tax ceiling; Mr. Graham says it would be "irresponsible" not to do so.
An honest discussion of the predicament of Social Security, the range of potential solutions, and the relative risks and benefits of private accounts would have been a service to the country. That such a debate didn't take place at last week's stage-managed economic conference is not terribly surprising, but it's nonetheless disappointing.
