The debate on how to reform Social Security has been rancorous with the American worker losing their right to save for retirement.
It isn't about Karl Rove or tricking the under 45-age group, as a recent letter writer proposed. It is about empowering the American worker. Those who are opposed to the voluntary personal accounts are saying the worker isn't smart enough to be trusted with their own money and must be taken under the opponents' wing for protection. The option to control a portion of our retirement is a basic right. It is up to each individual to decide how to save and invest not some politician in Washington, D.C., or the next-door neighbor. Don't impose your retirement plan on me.
Don't shoot the messenger. The message that Social Security is in need of reform did not originate with President Bush, nor is the concept of personal accounts new. President Clinton in the late 1990s presented a proposal that recognized how to save the Social Security system, which included personal retirement accounts as feasible, cost-effective, and safe. It was reported at that time that "President Clinton knew it would be fairly simple to solve the logistical problems associated with creating personal retirement accounts, and that these accounts could be structured to be both inexpensive and low-risk." So what has changed? The messenger?
Much has been made that PSAs would add trillions to the national debt. On the contrary, the president's plan would not significantly add to the debt, as the choices are borrow at today's lower interest rates or borrow at tomorrow's higher rates. If borrowing is not desirable, use the Trust Fund money, which has the purpose of paying benefits. However, by tapping the Trust Fund, the opponents would have to recognize that the truth is all of the Society Security surpluses to date have been spent on other things.
Other opponents emphasize the riskiness of PSAs pointing out that markets go down as well as up, which is so true. However, most retirement plans have had money in the stock market for decades with positive returns.
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Consider further that the average monthly Social Security benefit today for a single retiree is only $920 and even if Social Security manages to pay all promised benefits, the real rate of return will still be 1 percent to 1.5 percent or less. Now consider the long-term real return on corporate stocks has been at least 7 percent to 7.5 percent and the long-term real return on corporate bonds has been around 3.5 percent. You decide which scenario is best for you. The operative words are "you decide," not someone deciding for you.
Insofar as risk is concerned, we have more to fear from political risk than market risk. For example, the proposed political fix for Social Security includes higher taxes, higher age requirements, and lower benefits. All of these fixes are being decided by others and will have a more significant negative impact on lower benefit checks than market risk.
Please, give me market risk.
Personal saving accounts have been proposed by both sides of the aisle.
It is time to set aside the political posturing and let the American worker decide.
Chadwick, Fargo, is a retail store manager and former member of The Forum's Reader's Board. E-mail chadwick1019@yahoo.com
