By Dick Morris - 01/12/05 12:00 AM EST
This fear of failure is the key element in the reaction of American voters to any attempt to fix Social Security. Fear of no retirement income is a key and vital element in our political construct and must not be taken lightly. While the president’s priority is to allow private investment, his constituents expect restructuring to avert bankruptcy.
That leaves three ways to protect Social Security in the years to come: raise taxes, cut benefits or rely on increased revenues in private accounts as a result of the partial privatization. Supply-side conservatives in the White House are doubtless going to push the third option.
But Americans won’t buy it. They may be willing to gamble that the federal budget deficit will go away as a rising tide lifts all boats, but they are not going to bet their retirement on it. The administration cannot have its cake and eat it, too. It cannot privatize Social Security and then cite the hoped for increased revenues as the way to prevent the system from going bankrupt. If it tries to do that, it will give the Democrats the best of all possible issues for the 2006 midterm elections.
We all know that Bush will not raise taxes, least of all the Social Security tax, which is the most regressive of all federal levies. So he has to cut. While he can likely win the debate about how to privatize some of Social Security, he will find himself mired in the debate about how to cut benefits instead. Democrats will mix their issues and blame the Bush tax cuts for the reductions in Social Security benefits and will have a field day with the issue.
The history of presidential initiatives’ being sidetracked from their main objectives is extensive. As first lady, Sen. Hillary Clinton (D-N.Y.) first wanted to cover the uninsured. Her husband wanted to cut the cost of healthcare. But they ended up debating physician choice instead. When Clinton proposed his economic stimulus package, he found himself debating the merits of paying for swimming pools and midnight basketball.
Bush cannot avoid the central question: He must find a way to cut Social Security benefits for future retirees without undermining his political support.
The answer, as I have mentioned before in this space, is to index retirement age to life expectancy. An outright increase in the retirement age will evoke howls of protest, but linking it to life span will seem appropriate and acceptable to most Americans. After all, if medical science can raise the current life expectancy of 77 years to 100 in the next decades, are we going to have to fund 45 years of retirement? When will it stop?
As we live longer, we stay fit and vital longer. It is appropriate that our work lives extend longer. Socialist countries throughout the world love to lower retirement ages to make people prematurely dependent on the government. But we should move in the opposite direction. In the long run, indexing retirement to life expectancy will yield enormous revenues to the system, far more than a one-shot increase in the age in the current legislative cycle.
The alternative — basing Social Security benefit increases on cost-of-living increases rather than wage increases — smacks of making people retire on less and is likely to be much less politically acceptable than indexing the retirement age.
Bush needs to proceed with care on this issue. He is gutsy for tackling it in the first place, and he must make sure not to step on any land mines in the process.
Morris is the author of Rewriting History, a rebuttal of Sen. Hillary Clinton’s (D-N.Y.) memoir, Living History.