by John M. Curtis
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Copyright March 7, 2005
All Rights Reserved.

ulling the wool over the public, Sen. Chuck Hagel (R-Neb.) becomes the latest smokescreen for overhauling the nation's aging retirement system. Hagel's brainstorm throws a bone to Democrats, raising the retirement age from 67 to 68 while, at the same time, pushing President George W. Bush's private investment accounts. “We need more ideas,” Hagel told Bob Scheiffer on CBS's “Face the Nation,” ignoring a slew of better ideas that would fix the 70-year-old safety-net launched in the wake of the “Great Depression” by President Franklin Delano Roosevelt. Insulating the system from the stock market was essential to avoid the disastrous meltdown that brought the nation to its knees during the 1930s. Only four short years ago, investors watched their retirements go up in smoke, with the latest market “correction.” Hagel's brainstorm rearranges the deck chairs on the Titanic.

      Bumping up the retirement age doesn't begin to deal with the outrageous practice of allowing millionaires to collect and cash Social Security checks. More than half the millionaires in Congress also collect Social Security, despite earning six-and-seven-figure salaries. Hagel's plan is nothing new. That was the same approach taken when Congress raised the benefit age from 66 to 67 for retirees born after1960. What about allowing retirees to exchange benefits for equivalent tax breaks? Currently, millions of Social Security recipients collect benefits when they have no financial need. Allowing beneficiaries to exchange payments for tax breaks automatically keeps money in the system for needy beneficiaries. Allowing millionaires to collect Social Security defeats the system by sucking precious money out. Hagel's plan only stalls the day of reckoning for a short time.

      Bush's privatization plan is nothing more than a scheme to reduce the government's role in paying beneficiaries by 4%. His plan reduces the trust fund's mandatory Social Security payroll taxes from 12.4% to 8.4%, creating a whopping shortfall estimated at $2-trillion dollars. Even the General Accounting Office and Congressional Budget Office concede that private investment accounts don't solve Social Security's long-term funding crisis. Yet Hagel and other private account advocates refuse to address blinding inequities and egregious abuses in the current system. “I don't see how you make the problem better by diverting payroll tax revenue that otherwise goes into the Social Security trust fund,” said Sen. Joe Lieberman (D-Conn.) on CNN's “Late Edition” with Wolf Blitzer. Lieberman points to the unmistakable reality that private accounts do nothing to solve the expected shortfall.

      Pushing up the retirement age is a cynical attempt to avoid paying benefits. Talking about America's increased lifespan can't be used as an excuse to deny age-appropriate retirement to hardworking citizens. Hagel wants to move the goal posts rather than deal with the system's shortcomings. Allowing millionaires, including former presidents, to cash Social Security checks flies in the face of common sense. Bush's fanatical adherence to economic conservatives and Supply Side economics prevent him from finding a practical solution. It's obvious that today's $90,000 ceiling on calculating payroll taxes places an undo burden on low and moderate breadwinners. Why should tax payers earning six-and-seven-figures pay a smaller percentage of total income to Social Security? Ending the arbitrary $90,000 ceiling would automatically solve much of the system's long-term cash crunch.

      When Bush hinted he might consider raising $90,000 ceiling, conservatives screamed bloody murder, calling the plan a “tax increase.” Yet no one talked about raising the 12.4% tax rate. Administration officials are well-aware of the limited window on Social Security reform. They must strike while the iron's hot, capitalizing on the president's recent political clout. It can't drag out too close to the '06 midyear elections. White House communication director Dan Bartlett blamed Democrats for throwing cold water on the president's plan. “We're in the early phase of educating the public about why there needs to be change,” Bartlett told Brit Hume on “Fox News Sunday,” announcing Bush's multi-state sales blitz. Bush will try to convince a skeptical public that private accounts answer Social Security's fiscal crisis. In reality, they avoid dealing with the problem.

      Social Security's problem doesn't only stem from the actuarial imbalance anticipated as baby boomers begin collecting benefits in 2010. While it's true there are more people collecting benefits than paying in, it's also true that millionaires shouldn't be cashing Social Security checks. If all options are really on the table, then why has Bush remained fixated on private accounts? Only the investment community stands to reap the whopping windfalls from private accounts invested in government-approved mutual funds. There's nothing wrong with retirement planning or mutual funds. But Social Security was specifically designed as an annuity and firewall to the stock market. Unless the government offers insurance, the stock market remains too risky for future retirees. Before Bush pushes private accounts, he should keep his options open and fix the system's real problems.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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