Mr. Greenspan, What About Personal Accounts for Social Security?
By U.S. Sen. Larry Craig
March 3, 2004

Federal Reserve Board Chairman Alan Greenspan recently raised a ruckus when he called for future Social Security benefit cuts to slow government spending. He sent a strong signal to Washington politicians to come to grips with a reality that is settling in around the world. Political promises alone cannot guarantee retirement security. But there is something that might - adding personal retirement accounts to Social Security.

Just two days before Chairman Greenspan's testimony, I had the honor of hosting a visit to the U.S. Capitol by Australian Senator Nick Sherry. A Labor Party leader, he made the persuasive, hopeful case of how the United States can, like Australia did, avoid going down the disastrous road to Social Security cuts.

We can learn from the experiences of other countries -- what to do and what not to do.

France and Italy recently braved street protests and transportation shutdowns to take steps to rein in soaring, unsustainable Social Security costs. Delaying reform over the past twenty years, with large budget deficits, double-digit unemployment, taxes heading from 40 to 60 percent, it became too late for France and Italy to do anything but cut their Social Security promises. Germany's left-of-center government has also reduced its benefits.

Japan likewise finds itself in financial problems that are driven, in part, by exploding benefits for its senior citizens. In just 11 years, one in four Japanese will be over age 65. Japan also has soaring budget deficits and a national debt soon to exceed 170 percent of national income. The inevitable answer for Japan's government has been to propose cutting Social Security benefits for future retirees.

Raising taxes on workers should not be part of the solution. As other nations are discovering, the harder you make life for young families--the fewer children are born. The fewer children born, the fewer workers there will be tomorrow to pay the taxes needed to sustain Social Security.

Tax hikes punish work, prevent saving, and depress economic activity. Increases in tax rates reduce economic growth. In short, higher taxes mean fewer jobs and lower wages.

Many of the world's most socialist nations have been waking up to these realities and are now beginning to rely on personal saving rather than taxes to bolster retirement security. Even socialist Sweden now has a two-tiered system with personal retirement accounts. England, Germany, Australia, Spain, Italy, Russia, China, Chile and a host of former Eastern Bloc and Latin American countries have all implemented some form of personal savings accounts in their social security systems.

Yet, in America nothing has happened, and the clock is ticking. While the benefits promised to today's seniors and those nearing retirement are safe and will be fully paid by the U.S. Social Security system, our own date with destiny is almost as urgent as that of Europe and Japan -- millions of American baby boomers will soon qualify for Social Security.

President Bush has pledged his commitment to a safer, stronger retirement system. His Bipartisan Commission to Strengthen Social Security offered three models for consideration. Two of the three models put the Social Security system on a permanently sustainable path. One of those plans protects seniors' benefits while saving taxpayers $15 trillion - or almost $150,000 per family. As they say at the coffee shop, "That's a lot of money" and something we should pursue.

In 1998, then-President Clinton said America had three options for the future of Social Security. He said we could raise taxes, cut benefits, or find a way to increase the rate of return. These options haven't changed. Adding personal accounts as a part of Social Security means increasing its rate of return -- in other words, guaranteeing benefits by replacing political promises with ownership of real investments.

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Senator Larry Craig, (R-ID) is the Chairman of the U.S. Senate Special Committee on Aging

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Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA.