washingtonpost.com
Social Security: Opportunity, Not a Crisis
By George F. Will
Thursday, January 20, 2005; Page A25
The president's second term will begin today, probably with a flurry of
the usual flattery, such as: "My fellow Americans, America is wonderful
because you, the people, are wonderful -- the way you wear your hats,
the way you sip your tea." But his term also begins with Republicans
evidently thinking people must be frightened into accepting sensible
Social Security reform, and Democrats invoking chimeric "risks" to
frighten people away from a reform that enlarges freedom by reducing the
degree to which people are wards of government.
The president says Social Security should be reformed because it is in
"crisis." That is an exaggeration. Democrats say it should not be
reformed because there is no crisis. That is a non sequitur. Social
Security should be reformed not because there is a crisis but because
there is an opportunity.
What constitutes a crisis is a matter of opinion, and everyone is
entitled to his or her own. But not to his or her own facts. Here are some:
Social Security outlays may exceed revenue by 2018 -- that date almost
certainly will recede further into the future, as it has before, as the
economy outperforms expectations. After that, the government bonds that
Social Security surpluses have bought (money used to fund the
government) will be entirely redeemed, as the Social Security
Administration calculates, by 2042. Or 2052, according to the
Congressional Budget Office, using different assumptions about the rate
of economic growth. That depends partly on the rate of productivity
growth: Might a growth rate unusually high by historical standards
become normal? Immigration rates will affect the ratio of workers to
retirees.
Some people warning of a distant Social Security crisis postulate 75
years of 1.8 percent annual growth. But if America has 75 such sluggish
years, Social Security's insolvency will hardly be the nation's largest
problem -- and personal retirement accounts will reflect, not compensate
for, the stagnation.
Changes in life expectancy are certain; what they will be is unclear.
Since 1900, life expectancy at birth has increased 30 years (from 47 to
77), mostly during the century's first half, largely from reducing
infant mortality by conquering infectious diseases. But since 1950, the
most dramatic gain has been in life expectancy at 65. How much more
progress can be made there? How many people who live longer will choose
to work longer? What unknowable public health developments will
intervene? For example, if government succeeds in getting dramatic
declines in smoking, some anticipated Social Security savings -- from
the early deaths of millions of smokers -- will vanish.
All these are just the known unknowns; there surely are, as Donald
Rumsfeld says, unknown unknowns. Which means that today we may be less
distant from the enactment of Social Security (1935) than we are from a
real solvency crisis in the system.
If Social Security is in crisis, what word can describe the condition of
Medicare and Medicaid? Thirteen months ago this administration
improvidently enacted a Medicare prescription drug entitlement that by
itself adds to Medicare's solvency crisis a sum much larger than the
entire Social Security system's shortfall. Given the life-enhancing
dynamism of modern pharmacology, no one knows what the menu of
prescription drugs will be in even 10 years.
And last year America passed an ominous milestone: Spending by the 50
states on Medicaid exceeded spending by the states on elementary and
secondary education. The $4.9 billion gap will widen.
One reason for reforming Social Security is that it is not in crisis
compared with Medicare and Medicaid. But the best reasons rise from the
philosophy of freedom:
Voluntary personal accounts will allow competing fund managers, rather
than a government monopoly on income transfers from workers to retirees,
to allocate a large pool of money. This will enhance the economic
dynamism conducive to an open society. Personal accounts will respect
individuals' autonomy and competence and will narrow the wealth gap by
facilitating the accumulation of wealth -- bequeathable wealth -- by
people of modest incomes.
It used to be the political left that had an exaggerated confidence in
the transparency of the future. The left believed -- because Marx had
deciphered history's unfolding, or because the social sciences had new
analytic tools -- that the future had become knowable. Hence government
could boldly act, sure of society's predictable trajectory. Today some
conservatives, beginning their admirable project of Social Security
reform, lack the conservative virtue of sobriety about the limits of
prophecy. The sober truth is that the philosophic reasons for reforming
Social Security are more compelling than the fiscal reasons.
georgewill@washpost.com
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