Revamping Social Security

Voters have a choice of two security debates in this year's presidential campaign. One is alive and well - how best to prevent terrorist attacks. The other - saving Social Security - has barely begun.

President Bush put aside his plan to partially privatize Social Security in the aftermath of Sept. 11. But he's expected to revive the idea in this campaign. He needs to be specific. His 2001 Commission to Strengthen Social Security set out three reform plans, but the White House has yet to spell out its detailed choices.

John Kerry, meanwhile, has opposed the Bush idea of individual retirement accounts but offers few specifics on how he would save Social Security. He opposes a cut in benefits, as does Mr. Bush. But will he raise taxes? Raise the retirement age? Or just hope for rapid economic growth?

Many workers value the relative "security" of Social Security, especially as more companies have shifted from traditional pensions toward plans such as 401ks. And they may have found some comfort in recent news that the Congressional Budget Office estimates Social Security will be able to make full payments to retirees until 2052. That's 10 years longer than the Social Security Administration's own estimate. After 2052, pensioners would receive about 80 percent of promised benefits that today average $900 a month.

Still, the nation needs a rigorous debate to make the changes needed to head off the eventual shortfall.

The Bush proposal for individual retirement accounts has great uncertainties. Can most Americans be asked to wisely save and invest for their retirement and accept the risks? Even many of those eligible for 401(k)s haven't signed up or, if they have, make poor choices on investments or don't contribute enough. The average balance in 2001 in 401(k)s of households age 55 to 64 was about $55,000 - hardly a comfortable provision for, say, 20 retirement years.

In Sweden, a partial privatization of its system in 2001 has had trouble. One reason is that it was badly designed and run. But also, participants were too passive in choosing funds, with many of them having lost money.

One question hanging over privatization in the US is the start-up cost, estimated at $1 trillion. Would that be paid for by a portion of the current Social Security payroll taxes, an add-on to the tax, or general revenues?

On his side, Mr. Kerry hasn't said whether his alternative is to simply raise taxes. The International Monetary Fund estimates that paying for future obligations would require a 13-percentage-point increase in payroll taxes.

Voters need to demand more details and debate from all federal candidates to define the best solution for this important nest egg.

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