Upon winning the 2004 Presidential election, President Bush declared that he earned political capital and now intends "to spend it." It now appears that President Bush will spend his hard-earned political capital fighting for social security reform. If he succeeds, Bush will have passed one of the most monumental domestic policy bills in the past 50 years.
Already, Democrats and special interests groups, most notably the AARP, are lining up to fight against the reforms. Fighting against Social Security, though, is just another example of the Democrats' refusal to think progressively outside the box.
The Democrats are continuing their trend of spewing off a reactionary response to any change to the status quo. In fact, their biggest argument against Social Security reform so far has been to claim that social security really is not in that bad of shape after all. While that may or may not be true, that does not automatically mean that reforming social security is a bad idea. The Republicans have become the party of forward-thinking individuals, while the Democrats continue to simply criticize Republican proposals while offering no real proposals of their own.
Even while there is no immediate crisis, steps should be taken now to reform social security for our future. According to the 2003 report of the Social Security system's Board of Trustees, in 2018, just 14 years from now, the Social Security system will begin to run a deficit. That of course means that soon benefits will have to be cut or taxes will have to be raised. We are already forced to pay in 12.4 percent of our income up to $87,900. From this, we get a dismal return of less than two percent. To make ends meet, the Social Security Administration reports that the payroll tax would have to increase to 18 percent by 2032. The alternative would be to cut benefits by more than 25 percent. Americans deserve better.
It is low-wage workers, whom the Democrats claim to care about so much, who deserve and need Social Security reform the most. Low-wage workers often have little or no money left after taxes to invest for their own retirement. These workers depend upon Social Security for their future retirement. However, the current system simply does not provide enough for them.
Even with this massive governmental program, one in 10 seniors lives in poverty. If private accounts are allowed, low-wage earners will be able to earn a much higher return than the inadequate amount Social Security currently provides.
The President's proposal is another effort at promoting an ownership society. Reform will allow every American to realize that they can make their financial future better by investing today. Millions will realize that they are better off without the government holding their hand, learning in effect that government is really holding them back - perhaps the Democrats' biggest fear.
We will have some direct control over our own retirement accounts. And some direct control is needed. According to the Cato Institute, since its program's inception, the average return on Social Security has been between one and two percent. However, since 1926, the average rate of return in the stock market has been 7.56 percent. Moreover, even during the worst 20-year period, which includes the stock market crash of 1929, the rate of return from the stock market was 3.36 percent. So, even during the worst phase, private accounts would far outpace traditional Social Security.
Reforming Social Security would not benefit only the individual. The new Social Security system would also have a positive influence on the economy at large. Personalized accounts would lead to huge increases in national investment to the tune of 100s of billions of dollars annually. In fact, Harvard's Martin Feldstein estimates that modernizing Social Security has a value of $10-$20 trillion to the U.S. economy and would permanently increase our GDP by five percent.
President Bush's proposal is a visionary look at how conservative ideology can make everyone better off. While his ambition may be a large one, the potential benefits of his vision are even greater. Social Security reform will bring compassionate conservatism to the masses.
Mike Schrimpf is a senior majoring in Political Science.
