Independent Women's Forum - Research Areas > Social Security and Retirement

The Need for Entitlement Reform

info@iwf.org (Allison Kasic) — Tue, 29 Jul 2008 09:18:00 EDT

John Stossel on Entitlements

info@iwf.org (Allison Kasic) — Wed, 11 Jun 2008 09:30:00 EDT

In his column today, John Stossel points out the irony of "entitlement" programs:

That's the government's ironic term for programs that transfer money from people who earned it to people who didn't.

Entitlement? How can you be entitled to someone else's money?

Irony aside, entitlements are taking up a growing portion of the federal budget and, as Stossel points out, this comes with serious consequences:

Today's big problem with entitlements is that their growth will soon eat everything in the federal budget.
Last month, the Congressional Budget Office (CBO) analyzed the growth of government spending and deficits for Rep. Paul Ryan (R.-Wis.), ranking member of the Budget Committee. The report estimated that spending on Medicare, Medicaid and Social Security, which in 2007 represented about 8 percent of GDP, would balloon to 14.5 percent in 2030 and 25.7 percent in 2082.

There is no way that can fly.

If you add in all other spending, including interest on the debt, federal spending under the CBO's scenario would eat up an astounding 75.4 percent of GDP in 2084.

If taxes don't keep pace, the CBO says the "additional spending will eventually cause future budget deficits to become unsustainable ..."

And if taxes were to keep pace? The CBO says, "[T]ax rates would have to more than double."

More here.

Another Campaign, The Same Old Social Security Attacks

info@iwf.org (Carrie L. Lukas) — Mon, 19 May 2008 09:51:00 EDT

It is one of politics most tired cliches: with almost each campaign, politicians tar those who favor savings-based Social Security reform tarred as "privatizers" who "threaten" seniors benefits. It is an absolute unabashed lie, of course, but apparently effective politics. Here is a story on Senator Obama attacking Senator McCain for supporting Social Security reform. The article seems like it could have been written in any campaign in the last two decades (so much for new politics!). It also begs the question, is there any domestic policy issue that Senator Obama doesn't think the solution is raising taxes on those with high incomes?

Think we don't need entitlement reform?

info@iwf.org (Allison Kasic) — Wed, 07 May 2008 10:02:00 EDT

Think again. Social Security and Medicare take up an increasing amount of the federal budget each year, and that trend will only increase as Baby Boomers retire. The National Center for Policy Analysis crunched the numbers and this is what they found:

In the absence of a tax increase, if the federal government keeps its promises to seniors and balances its budget:

By 2012, the federal government will stop doing 1 in 10 other things it has been doing.

By 2020, the federal government will stop doing 1 in 4 things.

By 2030, about the midpoint of the baby boomer retirement years, the federal government will stop doing about 1 in 2 things.

According to the Congressional Budget Office (CBO), if Medicare spending continues to grow at the historical growth rate of total health care spending:

Social Security, Medicare and Medicaid (the health care program for the poor) will consume nearly the entire federal budget by 2050.

By 2082 Medicare spending alone will consume nearly the entire federal budget.

The CBO also found that if federal income tax rates are adjusted to allow the government to continue its current level of activity and balance the budget:

The lowest marginal tax bracket of 10 percent would have to rise to 26 percent.

The 25 percent marginal tax bracket would increase to 66 percent.

The current highest marginal tax bracket (35 percent) would have to rise to 92 percent!

Additionally, the top corporate income tax rate of 35 percent would have to increase to 92 percent.

More here.

New at IWF: Social Security

info@iwf.org (Allison Kasic) — Fri, 04 Jan 2008 11:47:00 EST

The latest feature over at IWF's campus corner resources page is a fact sheet on an issue I wish more presidential candidates would talk about, Social Security. It is the first in a series of issue fact sheets.

Check it out here.

Get the Facts: Social Security

Fri, 04 Jan 2008 10:23:00 EST

Download the IWF Social Securtiy Fact Sheet below.

Many young adults do not understand the problems facing Social Security. Having just entered the workforce, retirement seems very far off so Social Security is not a pressing concern. However, Social Security affects you today and will affect your future. Social Security played a significant role in the debates during the 2000 and 2004 elections, and should continue to be an important issue in 2008.

Hillary Clinton's Risky Scheme

info@iwf.org (Carrie L. Lukas) — Wed, 17 Oct 2007 14:18:00 EDT

Senator Clinton recently announced her plan for yet another new government subsidy for the middle class. This one is to encourage investment: if an individual puts away money for retirement, the government would match some portion of it, depending on their income level.

But as George Will points out in an op-ed today, in the past Senator Clinton has tarred the idea of investing in the stock market as a "risky scheme." Senator Clinton opposed proposals to allow individuals to use a portion of their Social Security contributions to fund personal retirement accounts as "a dangerous gamble that would make retirement insecure by linking retirement savings to the stock market. Echoing a trope from Al Gore's 2000 presidential campaign, she said investing retirement funds in the stock market was a "'risky scheme.'"

Will uses this as just one example of Democrats' attempts to pander to the middle class with promises of government largess.

It's important to note that not only are Democrats like Senator Clinton promising a slew of expensive new taxpayers-provided programs for favored voters, they are also ignoring the problems in existing programs. Senator Clinton, for example, has yet to provide any hint of what she would do to solve Social Security's financial problems, as I wrote about here.

Investment in the market is a good idea, but creating costly new government entitlement programs is not. Let's hope that Senator Clinton applies her new love of saving and investment to the federal retirement program that's already exists.

Is Nothing Better Than Something?

info@iwf.org (Carrie L. Lukas) — Thu, 04 Oct 2007 18:19:00 EDT

National Review

Political wisdom holds that you can't beat something with nothing. But when it comes to Social Security, the Democrats are putting that truism to the test.

Politicians across the political spectrum, from President Clinton to President Bush have agreed that Social Security faces a serious financial problem. The basic facts are undisputed: the Baby Boomers are starting to retire and we are living longer; that means Social Security's expenses are climbing. The growth of our workforce hasn't kept pace with growth in the number of Social Security beneficiaries; that means payroll tax receipts soon won't cover all of Social Security's obligations. The deficit starts in about ten years and gets worse each year thereafter.

People may quibble about the exact numbers and magnitude of the deficits, but everyone recognizes that a problem looms and needs to be addressed. So what do politicians propose doing about it?

This week, presidential hopeful Barack Obama penned an op-ed providing insight into what he might do as President to reform Social Security. Most of his piece focused on what he would not do to solve Social Security's problems: "First, I will fight against efforts to privatize Social Security...Second, I do not want to cut benefits or raise the retirement age. I believe there are a number of ways we can make Social Security solvent that do not involve placing these added burdens on our seniors."

In other words-as anyone who seeks the Democratic nomination must-Senator Obama bows to the powerful AARP senior lobby, vowing not to do anything to affect the payments given to this richest cohort in our society. He also promises them a tax cut for good measure.

The only change he recommends considering for Social Security is to raise taxes. Specifically, he proposes eliminating the cap on the amount of income taxed for Social Security. He claims: "If we kept the payroll tax rate exactly the same but applied it to all earnings and not just the first $97,500, we could virtually eliminate the entire Social Security shortfall."

Yet this massive tax increase would not, in reality, eliminate Social Security's deficit. Under current law, the highest earners' benefits are calculated based on the amount of income they paid payroll taxes on. If the wage cap were eliminated, and Oprah Winfrey, Bill Gates, and other multi-millionaires paid taxes on all their earnings, then the amount that they would be due at retirement would also soar. A recent Social Security Administration study of eliminating the wage cap found that this massive tax increase would only give Social Security an extra seven years before beginning to run deficits.

Senator Obama may also be considering changing the benefit formula so that benefits are not calculated on the entire amount of income taxed. This would be a significant change in the system, eroding the concept of Social Security as an earned entitlement, and a big benefit cut for future seniors. Moreover, even with this benefit cut for upper-income retirees, a substantial deficit would remain. The tax increase would also significantly increase marginal tax rates on millions of Americans, including small business owners, discouraging productivity and slowing economic growth.

Another presidential hopeful, Senator Hillary Clinton, has taken a different tack in discussing Social Security's future. She has chosen to solely talk about what she won't do to change the system. Clinton has said she won't "privatize" the system, by allowing individuals to save their money through a system of personal accounts. She also won't raise the retirement age, reduce benefits, and has even shied away from supporting tax increases like the one proposed by Senator Obama.

Her campaign website essentially ignores Social Security. Her senatorial website provides empty platitudes such as "I think it is essential that the Administration and Congress take the necessary steps to secure the solvency of this important program for current and future retirees," but doesn't offer any actual thoughts on how to accomplish this considerable task.

Who has the better tactic? Senator Obama with his massive, economy-slowing tax increase, or Senator Clinton with her policy of neglect? Only time will tell who the winner of this political contest will be. But we know who the losers already: our Social Security system and the American people.

-Carrie Lukas is the vice president for policy at the Independent Women's Forum and the author of The Politically Incorrect Guide to Women, Sex, and Feminism.

Guess what else is structurally deficient?

info@iwf.org (Carrie L. Lukas) — Fri, 17 Aug 2007 00:00:00 EDT

DC Examiner

WASHINGTON -

People wonder how government could ignore problems like those that led to the Minneapolis bridge collapse, but the truth is that officials have long been turning a blind eye to many looming disasters besides the nation's roughly 75,000 structurally deficient highway spans.

Consider our Social Security system. Each year, the nonpartisan Social Security Trustees details the program's sorry financial prospects. The latest report concluded that the program - which consumes more than one-fifth of the total budget - will begin paying out more in benefits than it takes in as taxes in just 10 years.

At that time, Social Security will begin drawing down its "trust fund," which means it will demand additional tax dollars from the general revenue to meet its obligations. By 2041, when the trust fund is exhausted, Congress will have to hike payroll taxes or starting slashing benefits for seniors.

Congress has known about this problem for decades. You could choose any trustees report from the last 10 years, and, while the dates and numbers may change slightly, the bottom line remains the same: Social Security is structurally deficient.

Social Security isn't like climate change, where countless factors affect weather trends, human action competes with nature, and trend lines must be discerned from thousands of years of information. Social Security is straightforward. How much money goes into the system depends on how many people are working in the United States. How much is spent depends on how many people qualify as beneficiaries.

The trends that determine these outcomes are already in motion. People are living longer, which means they are collecting more Social Security checks. The baby boomers are getting ready to retire, dramatically expanding the ranks of the retired.

And fertility rates in the United States have been, and remain, relatively low, which means there are not enough workers coming into the system to pay for the growing number of beneficiaries.

Unless there is a major, unexpected demographic shift, we can predict Social Security's future. Social Security began as a pyramid, but increasingly resembles a tower. The pyramid, with its wide base, could stand; a top-heavy tower cannot.

Policy-makers know this but have failed to act. Of course, a financial crisis in Social Security isn't like a bridge collapse. No one will lose his or her life. Yet it will have serious consequences for the economy. It has real meaning for those who are counting on Social Security for retirement income and workers who will have to pay to prop up the ailing system.

There have been countless hearings and commissions to study the problem and consider potential solutions, but the essential options are limited. Policy-makers can increase revenues into Social Security by raising taxes, issuing new debt or cutting other programs to free up money.

They can also reduce benefits by raising the retirement age or providing lower subsidies to more affluent seniors. Or they can fundamentally alter the system to prefund future benefits so that beneficiaries no longer depend on incoming tax revenues for their payments.

Only the last option will make this program structurally sound. So long as Social Security remains a transfer program, taking from one group to give to another, it remains vulnerable. The only way to know that obligations will be met is to prepare to meet those obligations immediately.

This year, once again, the trustees calmly urged policy-makers to take action to address Social Security's looming problems. Doing so is fairer: It will allow for "a gradual phasing in of the necessary changes" and for "adjustments" to be "spread over more generations." There is another virtue in timely action.

Ten years down the road, policy-makers won't have to answer the most uncomfortable question. Why have you ignored this problem for so long?

Carrie Lukas is the vice president for policy and economics at the Independent Women's Forum and the author of "The Politically Incorrect Guide to Women, Sex, and Feminism."

IWF on Social Security

info@iwf.org (Allison Kasic) — Mon, 14 May 2007 16:47:00 EDT

For Our Grandchildren recently interviewed IWF's Carrie Lukas about the unfunded liabilities, deficit spending, and borrowing from the Social Security trust fund will harm us all.

Check out the interview here.

Misusing Mother's Day

info@iwf.org (Carrie L. Lukas) — Fri, 11 May 2007 00:00:00 EDT

National Review

There are many things to like about Mother's Day: tulip bouquets, elegant brunches, and home-made cards from the kids. After all, the idea of honoring Mom for nurturing the next generation is as all-American as apple pie and, well, motherhood.

Yet Mother's Day also has its unseemly under-belly. It's not the commercialism of another holiday brought to you by Hallmark, although certainly one can find plenty evidence of consumerism run amok. Dads can be made to feel like cads if they aren't planning to buy their wives the "Mother's Day Spa Package," which, according to Elizabeth Arden's Red Door, "is everything a mother deserves" and starts at $210. But few families really fall into this trap, and most moms are content receiving cards of pasta glued to construction paper.

What's really in poor taste are the attempts to use Mother's Day to push a political agenda. Teresa Heinz Kerry, for example, seized the occasion to pen an op-ed for the Boston Herald, entitled "For mother's sake, tweak Social Security." She writes: "Unfortunately there is one entity that doesn't seem to share this respect for the work our mothers do: the U.S. government and the Social Security system."

Mrs. Kerry's chief complaint is that Social Security benefits are calculated based on 35 years of earnings, and since many women take years out of the workforce to care for children, they have several years of "zero" earnings, reducing their monthly payments. Mrs. Kerry offers this tear-jerking policy solution: "We should allow women to drop out the 'zero years' instead of telling them that their care for their young children and elderly parents is worth zero when it comes time to calculate Social Security benefits."

It sounds very nice, but it's terrible public policy. What would this mean for the millions of single and low-income moms who have to work to make ends meet, paying thousands of dollars in Social Security taxes each year, but would much prefer to be home with their kids? Under Mrs. Kerry's defined benefit-system, many of these women would get lower benefits than the stay-at-home moms since their extra years of earnings and taxes wouldn't yield any additional benefits.

Ms. Heinz also ignores the fact that on average women already have higher rates of return on their Social Security payments than men do, and couples with a stay-at-home mom tend to do better than couples in which both spouses work. Undoubtedly, Social Security's defined benefit-system is inherently arbitrary and unfair: the formula used to calculate benefits ends up rewarding some groups and penalizes others. And married, stay-at-home moms are generally among the advantaged. Social Security provides a spousal benefit, so a stay-at-home mom who never enters the workforce will receive fifty percent of the benefit generated by her husband's earning history. Working wives, in contrast, get a much worse deal. They get either the higher of the two--the spousal benefit or a benefit based on their own earnings history--which means that many working moms get no additional benefits for their years of work and taxes.

One of the many virtues of creating personal accounts within the Social Security system would be that they would avoid such unfair quirks. At least that portion of a worker's Social Security contribution that is put into the personal account would fund his own retirement benefits, rather than someone else's, and with a fair return, too. But Mrs. Kerry would prefer instead to tweak the current system to further favor particular groups like stay-at-home moms. If she looked at the recent report by Social Security's Trustees, she'd realize that it's irresponsible to talk about raising anyone's benefits at a time when the system is spiraling toward financial ruin: It's the equivalent of a woman demanding her day at the Red Door spa when the bank is preparing to foreclose on the family home. If Mrs. Kerry is concerned about women's retirement security, she should encourage her husband and the Democrats in Congress to discuss ways to reform the system to reduce Social Security's unfunded liabilities-- something they have steadfastly refused to do.

Mrs. Kerry is just one example of using Mother's Day as a political tool. Code Pink is holding a "peace festival" with Gloria Steinem to call for an end of U.S. involvement in Iraq. Activities include "speakers, music, arts and crafts and perhaps even imPEACHment pies!" The National Organization for Women's website urges visitors to honor their mothers by signing their "Mothers Matter and Caregivers Count" petition, which urges Congress to adopt legislation to "increase work/life balance" --code words for more government regulation of the workplace and mandated benefits.

Perhaps it's inevitable that groups will use any media hook to push their cause. There seems something vaguely sexist, however, in this use of Mother's Day, which consistently puts women in the position of clamoring for more benefits from Uncle Sam. Father's Day doesn't occasion such an unseemly push for favors for men.

Women deserve better on Mother's Day. No, we don't all expect full-day spa treatments, but a little respect would be nice.

Carrie Lukas is the vice president for policy and economics at the Independent Women's Forum and the author of The Politically Incorrect Guide to Women, Sex, and Feminism.

An Interview with Carrie Lukas

Thu, 10 May 2007 00:00:00 EDT

For Our Grandchildren

MEET CARRIE LUKAS:

Carrie L. Lukas is the vice president for policy and economics for the Independent Women's Forum. Lukas is the author of The Politically Incorrect Guide to Women, Sex, and Feminism, which was published by Regnery Publishing in May 2006. She is also a contributor to National Review Online.

Since joining the Independent Women's Forum in 2003, Lukas has authored the IWF special reports, Dependency Divas: How the Feminist Big Government Agenda Betrays Women and Recess from Reality: The Feminist Failure to Embrace School Choice. Additionally, she has written IWF position papers on social security and tax policy. Lukas is a regular fixture on opinion pages around the nation, and has appeared on numerous radio, cable and network television programs. She holds a bachelor of arts from Princeton University and a master's in public policy from Harvard University.

Interview

Abdnor: With Mother's Day approaching, you're the perfect person to help us answer a few questions.

You're an expert on Social Security, the Mother of a toddler and you'll soon deliver your second child.

You've been working on Social Security for many years. During that time, has your thinking about the future of Social Security changed?

Carrie Lukas: When I began working on Social Security, I don't think I realized just how difficult it would be for policymakers to make improvements to the system. There is near universal agreement that Social Security will face a real financial crisis, yet few policymakers are willing to seriously discuss how to solve those problems. That can be discouraging. But the challenges the system faces today are the same that they faced ten years ago when I first started working on the issue-the need for action has just become more urgent.

Abdnor: You're a "working" Mom--earning outside income. How does the system treat working Moms, married, divorced or single? Does it treat everyone equally?

Carrie Lukas: That's one of the real problems with the way that Social Security is set up. It doesn't treat everyone equally. Some choices and lifestyles are rewarded and some are penalized by the system. I don't think that's the proper role of government.

Consider, for example, that many married women who work won't earn an extra penny of Social Security benefits for years of contributions to the system. That's a real disincentive for married women to enter the workforce. Women who get divorced can also suffer under the current Social Security system. Imagine a woman who left the workforce to care for children but gets divorced after nine years of marriage. She has no right to any of the retirement benefits her husband accrued during their marriage. She may be starting from square one in saving for retirement.

Abdnor: What should be the goal(s) of modernizing Social Security?

Carrie Lukas: We need a Social Security system that treats individuals fairly and provides individuals with a real opportunity to save. Right now, the money individuals pay into Social Security is a big lost opportunity. For many Americans, particularly those with lower incomes, the money they pay into Social Security is the only money they are putting away for retirement. Unfortunately, Social Security is going to provide them with a really low rate of return. They deserve better than that. That's why I believe we need to give individuals the chance to use a portion of their money to fund a personal savings account. A system of personal accounts that allows individuals to save and invest their payroll taxes will give everyone the opportunity to build a real nest egg and be better off at retirement.

Another goal should be to make Social Security financially solvent. I find it appalling to think that my daughters-one not yet two and another expected any day now-are going to be saddled with a tremendous debt from programs that were put in place decades ago. We need to act now to make sure that Social Security is sustainable and doesn't cripple the economy for the next generation.

Abdnor: If Social Security isn't fixed soon, what do you think will be the impact on your generation and your children's generation?

Carrie Lukas: I simply cannot imagine that policymakers are going to let the system continue on its current course. It would just be too irresponsible and potentially devastating for the next generation.

Consider that when my girls enter the workforce, they are going to be paying 17 percent of their income just to support Social Security. Medicare costs are also going to be on the rise. Is that really the legacy that we want to leave them? Not only will this make the next generation poorer, but it will leave them less able to deal with whatever challenges they face. We don't know what lies ahead-the next generation deserves the flexibility to be able to allocate their resources as we see fit. We shouldn't lock them in to spending such an enormous percentage of their income on transfer programs to the elderly.

Abdnor: On a personal note, what are a few of the best things about being a Mother?

Carrie Lukas: It sounds like a cliché but it is really impossible to describe how rewarding it is watching a child grow and develop her own personality. It is such fun watching my daughter discover the world around her and get such joy from simple things.

Got your priorities straight?

info@iwf.org (Charlotte Hays) — Mon, 07 May 2007 09:05:00 EDT

Michael Barone says that there is an issue that will have more immediate effects than the more popular global warming:

"Consider two long-range issues that are not pressing matters this year but pose, or are said to pose, threats a generation or two away. One of them you don't hear much about: Social Security. The other you hear about all the time: global warming. Yet this gets things upside down. We have an unusually precise knowledge of the problems that Social Security will cause in the future. But we don't know with anything like precision what a continuation of the current mild increase in temperatures will mean.
"Start with Social Security. We have a pretty good idea of how many Americans will turn 62 and start collecting Social Security in 2068, because they've all been born, and we can estimate with near certainty how many will die then and, with a bigger but tolerable margin of error, how many will immigrate from foreign countries..."

Why women don't need the ERA...

info@iwf.org (Charlotte Hays) — Fri, 27 Apr 2007 10:27:00 EDT

Eleanor Smeal and Martha Burke have a piece in today's Washington Post explaining why we need to pass the Equal Rights Amendment:

"Why is the amendment needed? Twenty-three countries -- including Sri Lanka and Moldova -- have smaller gender gaps in education, politics and health than the United States, according to the World Economic Forum. We are 68th in the world in women's participation in national legislatures. On average, a woman working full time and year-round still makes only 77 cents to a man's dollar. Women hold 98 percent of the low-paying 'women's' jobs and fewer than 15 percent of the board seats at major corporations. Because their private pensions -- if they have them at all -- are lower and because Social Security puts working women at a disadvantage and grants no credit for years spent at home caring for children or aging parents, three-quarters of the elderly in poverty are women. And in every state except Montana, women still pay higher rates than similarly situated men for almost all kinds of insurance. All that could change if we put equal rights for women in our Constitution."

There are numerous flaws in all the "facts" cited to justify the ERA. The wage gap, for example, almost vanishes if the right data is fed into the factoring. (See below, the item on comparable worth.) Young women now outnumber young men on college campuses.

We have a female Speaker of the House and a woman is running for president. I can't believe that women are better off in the 67 countries, whatever they are, that have a larger percentage of women as national legislators. Social Security is garnered from our wages, and, if people such as the authors want to change this, there must be a thoroughgoing debate about Social Security and the solvency of the program.

I can't speak to insurance issues, but I'll bet the rates, if the information cited in the op-ed is accurate, are based on actuarial figures rather than any anti-woman bias.

Bipartisan Social Security Trustees Once Again Call for Action

Tue, 24 Apr 2007 13:05:00 EDT

The annual Social Security Trustees Report was released today and, and just like in years past, the Trustees warn about the program's gloomy financial prospects and urge policymakers to act expeditiously to avert major problems:

We are increasingly concerned about inaction on the financial challenges facing the Social Security and Medicare programs. The longer we wait to address these challenges, the more limited will be the options available, the greater will be the required adjustments, and the more severe the potential detrimental economic impact on our nation.

David John of The Heritage Foundation explains what dates are most important (such as 2017, when Social Security will begin running a deficit and using general revenues to pay promised benefits) and what lessons we should take from the Trustees' data. Don't miss this report -- it is easy to ignore the coming entitlement time bomb when there are so many other policy problems that seem more urgent today, but as this Trustee Report tells us, the day of reckoning is approaching Social Security quickly and the sooner policymakers respond the better.

CPAC 2007--Can Entitlements Be Reformed?

info@iwf.org (Carrie L. Lukas) — Wed, 07 Mar 2007 00:00:00 EST

When we think about the next presidential election, a few issues come to mind for most voters:The War on Terror, the situation Iraq, maybe healthcare, energy policy and the environment. These are the issues that regularly make the news.

But today I'd like to urge all of you to consider a candidate's position on entitlement reform--and Social Security reform in particularly--as one of the key criteria for earning your support.

This isn't just because entitlement reform is an important issue, although it certainly is. Social Security alone consumes a fifth of the total federal budget. That's on par with our spending on defense so it's certainly worth knowing the prospective chief executive's plans for this gargantuan program. It also isn't because the next President is likely to be the first to see and have to budget for the coming entitlement budget crunch, although that's true too.

The reason that I would urge you to consider carefully what any candidate says about entitlements and Social Security is that a candidate's vision for Social Security says a lot about his or her vision of government. It helps you answer a simple question: Does this potential President want to prop up a system of big government dependency or does the next President want to create a new paradigm in which individuals own and control their money and future?

Social Security is one of the last great symbols of the big government New Deal era. Its system of financing is commonly called "pay-as-you-go" but can also properly be characterized as "tax and spend" since the government taxes individuals and uses that money immediately to pay current beneficiaries. Nothing is saved for the future. In the 21st Century, we know that this isn't sound financial planning. No one, and I mean no one, not even the craziest, leftwinger who will fight any changes to Social Security tooth and nail, would use this system of financing if they were starting a retirement system today.

Today, everyone knows that the basis for sound financial planning begins with saving and investing. We know the transformative power of ownership. Overwhelmingly, Americans would prefer to have an account with their name on it with money safely in the bank than to have an IOU from a government program.

The next President will have the opportunity to transform Social Security into one of the most effective, transformative government program in history. By incorporating a system of personal retirement accounts into Social Security, we can become a nation of savers. All Americans would be invested in the economy and would watch their assets grow.

Not only would such a system improve individual's financial prospects, it would also be a much fairer system.

Here might be a few questions to ask candidate Hillary Clinton. Does she truly think that women are best served by the current system that punishes some women's life choices and rewards others? Does she really think that a system that gives women who are married less than ten years no right to their husbands' future retirement benefits is fair to the millions of stay-at-home moms whose financial futures could be in serious jeopardy if they divorce? Does she think that the government is making the most of the money paid into Social Security by single moms, knowing that for many this may be their only chance to save for retirement?

The answer is clear. Of course Social Security isn't living up to its promise. It's unfair to working mothers; it's unfair to women who stay at home. America can and should do better.

Now I know that most everyone in this room already knows this. The purpose of this panel isn't to convince you of the need for Social Security reform or for the reform of other entitlement programs. It isn't to sell you on the power and benefits of individual ownership and market competition. I know that you are already sold.

The question we have been asked to consider is can the entitlement programs be reformed?

And on one level, the answer is again very clear and obvious: of course they can. Congress and the President have the power to change these programs at any time. And, given that we do live in the greatest country in the history of the world, I have complete faith that one day we will move in the right direction on entitlement reform.

There is a lot of good news about the prospects for entitlement reform. First of all, the facts are clearly on our side. We have also seen around the globe that country's can and do successfully transition from pure tax-and-spend pension system to systems that include personal retirement accounts. It can be done and indeed it will have to be done.

But the challenges to entitlement reform are very great. The key is going to be true leadership, which is again why I urge you to put this on the top of the list of considerations for our next President. We will need a President who has the vision of an ownership society and who is committed to bringing market forces into programs like Medicare.

We also will need Congress that's equally committed to this vision. And to get either of those things we need people out there--people like everyone in this room--who are demanding that our policymakers take action now.

We need everyone in this room to become committed to talking honestly about the problems inherent in systems like Social Security. We should talk honestly about the legacy that this generation threatens to leave their children: and it is a legacy of debt.

So often you will hear defenders of the system talk about a so-called generational contract. I'm sorry to have to say it, but that concept is an utter and complete lie. What kind of contract is it when one generation can simply vote itself bigger and bigger benefits and demand that the younger generation foot the bill? I'm 33 years old. I didn't sign up for such a contract. Certainly the child who is with me in my belly me today didn't sign up for any such a deal. Yet by the time she enters the workforce some twenty years from now she'll find that a grotesque and growing portion of her earnings will be dedicated to paying for the entitlement programs that her elders created for themselves and demand that she pay for.

Is that the legacy that people want to leave their grandchildren? Apparently it IS the legacy that the AARP wants to leave, which is why I'd argue that no true conservative or even generic Republican should ever be a member of the AARP. If you are, give up your membership now and tell them why. Whatever benefits you get from it aren't worth the price that your children and grandchildren will have to pay for the destructive policies they promote.

The question presented to this panel--can entitlements be reformed--is really one that only you can answer. The answer lies only in how commitment people become to pushing policymakers in the right direction. We all need to ask our representatives their position on these issues. Ask them if they support personal retirement accounts. Demand that they talk honestly about the need to scale back all of the benefits for seniors and talk about seniors needing to bear some of the costs of these programs.

Entitlement reform can be done, but it won't be easy. We will need commitment activists out there across the country pushing policymakers toward reform. We will need leadership from the next President. Let's make both of those a priority in the year ahead.

Thank you.

How to be "for the children"

info@iwf.org (Allison Kasic) — Tue, 06 Mar 2007 11:08:00 EST

This morning over at National Review Online, IWF's Carrie Lukas talks about Speaker Pelosi's concern "for the children." If Pelosi is really concerned with future generations, Carrie is happy to offer some policy suggestions:

"Speaker Pelosi should begin her analysis by looking at one of the federal budget's leviathans: Social Security. This program has been referred to as a 'generational compact.' Young people are supposed to happily hand over their payroll taxes that are used to pay Social Security benefits to today's senior citizens, knowing that they'll be able to demand the same from the next generation. Think of it as a kind of generational hazing.

"The problem is that Social Security's demands are becoming increasingly severe. When Nancy Pelosi graduated from college in 1962, payroll taxes to support Social Security were 6.25 percent on the first $4,800 of income, for a maximum tax of $300 per year. Today, Social Security's walloping tax rate of 12.4 percent applies to the first $97,500 of income, for a staggering maximum tax of $12,090. For most Americans, Social Security's payroll tax is the largest they pay.

"Unfortunately, things are only getting worse. When Speaker Pelosi's youngest grandchild (born just as the Democrats were taking over Congress) turns ten, Social Security will be taking in less from payroll taxes than will be needed for benefits. Social Security then will turn to its so called 'trust fund,' which simply means that Social Security will demand a portion of general tax revenues to supplement payroll taxes. By 2040, when the Speaker's 33-year-old grandchild will likely be entrenched in the workforce and trying to raise Pelosi's great-grandchildren, Social Security will require the equivalent of 17 percent of payroll, or taxes nearly 40-percent higher than they are today."

Read the whole article here.

Madam Speaker, Don't Forget about Your Grandchildren

info@iwf.org (Carrie L. Lukas) — Tue, 06 Mar 2007 00:00:00 EST

National Review Online

Nancy Pelosi isn't just the first female Speaker of the House; she's also the first grandmother to serve as Speaker. After being handed the gavel, Pelosi invited her grandchildren up to the podium, while imploring fellow Members: "Let's hear it for the children. We're here for the children."

While Speaker Pelosi's talk about "the children" may be political posturing, she's actually making an important point: Policymakers should evaluate policies based on how they affect future generations. America would be better off if policymakers focused on their decisions-- long-term affects, rather than their impact on interest groups and the next election.

Speaker Pelosi should begin her analysis by looking at one of the federal budget's leviathans: Social Security. This program has been referred to as a "generational compact." Young people are supposed to happily hand over their payroll taxes that are used to pay Social Security benefits to today's senior citizens, knowing that they'll be able to demand the same from the next generation. Think of it as a kind of generational hazing.

The problem is that Social Security's demands are becoming increasingly severe. When Nancy Pelosi graduated from college in 1962, payroll taxes to support Social Security were 6.25 percent on the first $4,800 of income, for a maximum tax of $300 per year. Today, Social Security's walloping tax rate of 12.4 percent applies to the first $97,500 of income, for a staggering maximum tax of $12,090. For most Americans, Social Security's payroll tax is the largest they pay.

Unfortunately, things are only getting worse. When Speaker Pelosi's youngest grandchild (born just as the Democrats were taking over Congress) turns ten, Social Security will be taking in less from payroll taxes than will be needed for benefits. Social Security then will turn to its so called "trust fund," which simply means that Social Security will demand a portion of general tax revenues to supplement payroll taxes. By 2040, when the Speaker's 33-year-old grandchild will likely be entrenched in the workforce and trying to raise Pelosi's great-grandchildren, Social Security will require the equivalent of 17 percent of payroll, or taxes nearly 40-percent higher than they are today.

Social Security is, of course, just the beginning of the problems with costly government programs facing the next generation. The federal healthcare program for the elderly, Medicare, faces an even more precarious financial future. The combined costs of entitlement programs for the elderly will boom in the coming decades, consuming a greater portion of the federal budget and leaving the next generation with a potentially crushing tax burden.

Responsible, forward-looking leaders would take this looming problem seriously. Yet politicians-- Pelosi herself chief among them -- have viewed Social Security as a convenient political weapon, not a problem to be solved. In 2005, when the president launched his effort to place Social Security on firmer financial footing, then Minority Leader Pelosi didn't simply critique his approach and offer an alternative. She sought to squelch debate and use the issue for political leverage. When pressed for when the Democrats would offer a Social Security reform plan of their own, Pelosi responded that they would offer a plan "never." So much for thinking about the children.

One Democrat, Rep. Robert Wexler (D., Fla.), actually had the courage to propose a plan to fix Social Security. I heartily disagree with his approach-- he relied almost entirely on raising taxes to address Social Security's deficit-- but it was an honest attempt to shore up Social Security's finances. According to Time, Wexler was "chewed out" by Pelosi for his efforts.

Speaker Pelosi is not alone in preferring the head-in-the-sand approach to Social Security policy. Senate Finance Committee Chairman Max Baucus (D., Mont.) issued a press release "blasting" the president for including in his budget funds to create personal accounts within Social Security. Chairman Baucus recoils from anything that would change the New Deal relic into an actual savings vehicle for Americans, but also opposes raising taxes or cutting benefits as a part of Social Security reform. In other words, Chairman Baucus wants all options off the table.

This isn't leadership. Speaker Pelosi, Chairman Baucus, and the others who now lead Congress cannot childishly pretend away real problems like Social Security's financial future-- at least, not without grave consequences for the future generations that they claim to want to protect. Speaker Pelosi, your grandchildren are waiting.

A Democrat Stands Up for Common Sense

Fri, 23 Feb 2007 07:36:00 EST

Democratic Governor and presidential hopeful, Tom Vilsack of Iowa, called for common sense changes to Social Security reform in a debate broadcast by CSPAN this week. He is quoted as saying:

"First and foremost, you're going to have to take a look at the way in which Social Security is indexed. Currently, it's indexed based on wages and price; we can index it on price and still maintain the stability of Social Security and maintain the purchasing power of Social Security without necessarily jeopardizing the future of Social Security."

How did I learn about Gov. Vilsack's statement? Because of the angry reaction on liberal blogs, see here and here.

The Democrat base, of course, likes to pretend that Social Security can continue indefinitely. It can't, of course, at least not without becoming an increasingly hefty burden on the federal budget and on taxpayers. Moving to price indexing would greatly reduce government's liabilities in a manner that is fair and responsible. That would make it easier to make other important changes to the system, such as giving younger workers the opportunity to invest.

Gov. Vilask didn't go that far of course, but I applaud his willingness to take this issue seriously.

What's Conservative About Social Security Reform?

info@iwf.org (Allison Kasic) — Wed, 14 Feb 2007 11:21:00 EST

Over at National Review Online this morning, IWF's Carrie Lukas responds to critics of her recent article on Social Security reform and explains the tax burdens associated with the current system and with reform efforts:

"Conservatives familiar with the history of the Social Security debate know that they need to look not only at the payroll-tax rate, but also at how much of income taxes is committed to the program. It's easy to make Social Security's numbers balance without changing payroll tax rates if you are willing to dump enough income taxes into the program. Shifting the burden to the income tax is what many liberals would love to do, since it would require 'the rich' to shoulder more of the burden. This was actually Vice President Al Gore?s strategy: simply inflate the value of the trust fund with enough general revenues to pay all promised benefits and the problem is solved! Conservatives know better: Taxes are taxes whether they are raised through payroll taxes, the personal income tax, or levied on corporations.

"Some Republicans have championed reform plans that include big personal accounts, but do nothing to address Social Security's liabilities. There are merits to these plans, but we shouldn't pretend that they don't have real costs for taxpayers. Ignore what precisely the revenue sources are and look just at how much the program costs - that way you'll know how much of a burden the system will place on taxpayers. (For example, Peter Ferrara's proposal explicitly depends on an additional $7.9 trillion in corporate income taxes over the next 75 years. Taxpayers should be as concerned about that tax increase as they are about any other.)"

Carrie continues,

"big personal retirement accounts cannot be the only measure of a plan's 'conservatism.' One of the most bizarre aspects of the debate about conservative Social Security reform is that some conservatives ignore the importance of controlling the growing burden of Social Security as we transition to a personal account system. Indeed, many of the most tax-heavy proposals have been offered by conservatives who have refused to discuss any reduction of the benefits promised (but unpayable) under current law.

"For example, they recoiled from the president's sensible plan to slow the growth of future benefits for those in the upper- and middle-income brackets. The president didn't propose changing the benefits of those already receiving Social Security or those with low incomes who will depend on Social Security at retirement (in fact, the president?s plan would have increased benefits for lower-income retirees relative to the benefits the current system can afford to pay). The president's plan simply would have made Social Security benefits stay the same in real terms for the top 0.5 percent of earners, instead of growing in excess of inflation, and would have allowed benefits to grow faster than inflation for everyone else. That alone would have done a lot to reduce the government's - and that means the taxpayers - liabilities."

Read her whole article here.

Social Security: The Status Quo is no victory for conservatives.

info@iwf.org (Carrie L. Lukas) — Wed, 14 Feb 2007 00:00:00 EST

National Review Online

I've been criticized, most recently by Larry Hunter in the New York Sun, for my January 25 article on National Review Online arguing that conservatives need to maintain a strategic perspective on the rising tax burdens that will follow from a failure to fix Social Security. Hunter wrote:

Unfortunately, some conservatives don't appreciate the prudence of a strategic retreat. Illustrative is the vice president for policy and economics at the Independent Women's Forum, Carrie Lukas, who in a January 25 article on National Review Online attacked Mr. Pence as "unprincipled" and "foolish" for rejecting new taxes. Shame on her.

First, I didn't call Mr. Pence "unprincipled" or "foolish"; I characterized the myopic objection to some, but not other, tax increases that might occur as a part of a reform of Social Security as a misapplication of an important conservative principle-- to keep taxes low-- and one that leads to a foolish result.

I am not arguing that conservatives should be less vigilant about rising tax burdens. I am arguing that conservatives should be more vigilant, and not be duped by scenarios in which we pretend to be holding the line on taxes but in reality accede to a massive increase in future tax burdens.

Three questions underlie the current debate within the conservative movement about how to approach Social Security reform. First, what constitutes a tax increase? Second, what's the conservative goal for Social Security reform? And finally, what is politically the best way to achieve that goal?

On the first question, there are those like Larry Hunter and Peter Ferrara who focus solely on holding the political line on no new taxes within Social Security. It's an admirable goal with which I and most conservatives will agree: Social Security already eats up 12.4 percent of workers' paychecks, and workers shouldn't have to dump more money into this poorly constructed transfer program. However, when we consider Social Security from a broader perspective, it's important to look not just at Social Security's payroll-tax rates and the amount of income subject to that tax, but also to consider the system's overall demands on taxpayers.

In ten years, Social Security won't require just the 12.4 percent payroll tax to pay benefits; it will also demand general revenues, which are primarily generated by income taxes. Over the next 35 years, under current law, Social Security's effective tax rate will climb 40 percent to roughly 17 percent of worker wages, even though technically the Social Security payroll-tax rate will stay at 12.4 percent.

Conservatives cannot afford to treat this cost increase as a non-event. It's a real rising tax burden, and it will reduce the real take-home pay of wage-earners. The status quo is an enormous defeat for those who believe in low taxes and limited government, and a big victory for those who want government to expand.

Conservatives familiar with the history of the Social Security debate know that they need to look not only at the payroll-tax rate, but also at how much of income taxes is committed to the program. It's easy to make Social Security's numbers balance without changing payroll tax rates if you are willing to dump enough income taxes into the program. Shifting the burden to the income tax is what many liberals would love to do, since it would require "the rich" to shoulder more of the burden. This was actually Vice President Al Gore's strategy: simply inflate the value of the trust fund with enough general revenues to pay all promised benefits and the problem is solved! Conservatives know better: Taxes are taxes whether they are raised through payroll taxes, the personal income tax, or levied on corporations.

Some Republicans have championed reform plans that include big personal accounts, but do nothing to address Social Security's liabilities. There are merits to these plans, but we shouldn't pretend that they don't have real costs for taxpayers. Ignore what precisely the revenue sources are and look just at how much the program costs-- that way you'll know how much of a burden the system will place on taxpayers. (For example, Peter Ferrara's proposal explicitly depends on an additional $7.9 trillion in corporate income taxes over the next 75 years. Taxpayers should be as concerned about that tax increase as they are about any other.)

On the second issue (the conservative goal on Social Security reform), the clear answer is that conservatives want to transform the tax-and-spend New Deal program into a system based on savings and investment, in which individuals' payroll taxes are used to fund personal retirement accounts.

However, big personal retirement accounts cannot be the only measure of a plan's "conservatism." One of the most bizarre aspects of the debate about conservative Social Security reform is that some conservatives ignore the importance of controlling the growing burden of Social Security as we transition to a personal account system. Indeed, many of the most tax-heavy proposals have been offered by conservatives who have refused to discuss any reduction of the benefits promised (but unpayable) under current law.

For example, they recoiled from the president's sensible plan to slow the growth of future benefits for those in the upper- and middle-income brackets. The president didn't propose changing the benefits of those already receiving Social Security or those with low incomes who will depend on Social Security at retirement (in fact, the president's plan would have increased benefits for lower-income retirees relative to the benefits the current system can afford to pay). The president's plan simply would have made Social Security benefits stay the same in real terms for the top 0.5 percent of earners, instead of growing in excess of inflation, and would have allowed benefits to grow faster than inflation for everyone else. That alone would have done a lot to reduce the government's-- and that means the taxpayers'-- liabilities.

Clearly it would be easier to transition to a system based on personal investment if we didn't have the current system's liabilities hanging over us. Conservatives need to consider how commonsense changes to future benefits can accomplish these goals.

Conservatives' unwillingness to discuss benefit cuts clearly stems from their desire to answer the third question: What is politically the best way to achieve the conservative goal for Social Security? Many have decided that benefit cuts must be entirely taken off the table and that the only hope is to sell the large personal accounts while avoiding discussing the costs of transitioning to such a system. This plan depends on a groundswell of support from the public and a complete Republican takeover of Congress-- and a takeover by Republicans who are willing to radically change Social Security without any Democratic support.

Anyone who watched the last Republican Congress knows that's a long shot. It seems more probable that Republicans will need cover from some Democrats-- many of whom are concerned about Social Security's long-term costs since they will squeeze out spending on other programs-- to address Social Security's financial shortfall while creating personal accounts within Social Security. These accounts might have to be small at first, but we can be confident that once people see money growing in their accounts they will want more of their money going towards them.

Certainly there are perils to trying to negotiate a reform package with Democrats. Conservatives would need to be prepared to walk away from any plan that relies on tax increases or fails to advance the overall goal of moving toward a savings-based system. Yet conservatives shouldn't celebrate having another two years pass by without Social Security reform. During the next two years, the amount of wages subject to the payroll tax will climb and Social Security's unfunded liabilities will rise by $1.2 trillion, making it that much more difficult to transition to a system of personal accounts.

That's not a victory for the low tax-- or the conservative-- cause.

Carrie Lukas is the vice president for policy and economics at the Independent Women's Forum. She is the author of The Politically Incorrect Guide to Women, Sex, and Feminism.

The Conservative Definition of Social Security Reform

Thu, 08 Feb 2007 14:45:00 EST

I've taken a good deal of criticism (most recently, in an oped in the New York Sun by Larry Hunter of IPI) for my January 25th article in National Review Online arguing that conservatives shouldn't demand that all tax increases be taken off the table when debating Social Security reform. I'm being caricatured as someone who's itching for a tax increase.

Of course, that's not true at all. But I am just as concerned about the massive tax increases that are scheduled under current law as I am to any tax increase that would be included in a Social Security reform package.

It frustrates me that some Republicans want to ignore the costs associated with letting the status quo reign. This isn't a negotiation in which conservatives and liberals are equally affected if no agreement is reached to change Social Security. The status quo is an enormous loss for those who believe in limited government and free markets, and a big victory for those who want government to expand.

Right now, many conservatives seem to want to focus only on payroll taxes under Social Security - both the payroll tax rate and the amount of income that is subjected to that payroll tax, which rises every year. They ignore that in about ten years, Social Security will also begin drawing on general revenues, most of which come from our income tax system. The money used to "reimburse" the so-called Social Security trust fund is also taxpayers' money. We should be just as concerned about how much Social Security is going to draw from general revenues as we are about the money subject to payroll taxes.

Some Republicans have championed plans that include very big accounts, don't do anything to reduce benefits promised under current law, and pretend that there are no costs associated with paying those benefits. But in fact those costs are huge and taxpayers will feel them one way or another (for anyone interested in the details of how expensive some of these big account plans can be for taxpayers, see this SSA analysis of one of the big account plans).

What confuses me most is when exactly did it become the hallmark of conservatism not to discuss reducing government promises and programs? So-called conservatives recoiled when the President called for very common sense reductions in the growth of future benefits for those in the upper and middle-income brackets. No one was talking about changing the benefits of those already receiving Social Security or those with low-incomes who will depend on Social Security at retirement (in fact, the President's plan would have increased benefits for lower income retirees relative to the benefits the current system can afford to pay). The plan simply would have made Social Security benefits stay the same in real terms for the top 0.5% of earners, instead of growing in excess of inflation, and would have allowed benefits to grow faster than inflation for everyone else. That alone would have done a lot to reduce government's - and that means taxpayers' - liabilities.

Clearly it would be easier to transition to a system based on personal investment if we didn't have the liabilities of the current system hanging over us, so why aren't conservatives willing to talk about ways to reduce the burden of the old system? Whatever this is, it isn't conservatism. It's political calculation, and a departure from the conservative principles of limiting the cost and reach of government.

But in any case, congratulations to Peter Ferrara and Larry Hunter; the hope of Social Security reform any time during this administration is effectively gone. With each passing year Social Security's unfunded liabilities rise by $600 billion, and it becomes more and more costly to move toward a system of personal retirement accounts. But at least I guess, the amount of income subject to the payroll tax will only go up another $3,000 next year, and that's supposed to be some kind of victory for the low-tax movement.

Count Us In!

info@iwf.org (Allison Kasic) — Thu, 08 Feb 2007 10:08:00 EST

IWF is pleased to join Students for Saving Social Security for the Count Us In! Campaign. Check out the Count Us In! petition here.

Here is a description of the campaign from S4's Mark Harris:

"This campaign is really about showing the level of support for personal accounts," says Mark Harris, the national director of S4. "Our generation respects leadership on entitlement reform because we value fairness. Today's young people are getting a terrible deal, and we urge Congress to keep personal accounts in the budget in order to protect future generations from even greater inequality."

Chairman Baucus Calls for Suspension of Reality

Mon, 05 Feb 2007 16:02:00 EST

Senate Finance Committee Chairman Max Baucus (D-Mont.) today sent out a press release "blasting" the President for including funds to help incorporate personal accounts into Social Security. Chairman Baucus recoils at anything that would change the New Deal relic into an actual savings vehicle for Americans.

So what does Chairman Baucus want to do to address Social Security's financial disaster? Here is what the press release says:

Chairman Baucus has said that efforts to address Social Security's long-term solvency must focus on ideas that improve the program's fiscal health without raising taxes or cutting benefits.

So along with personal accounts, Senator Baucus wants raising taxes and cutting benefits off the table. In other words, he wants essentially ALL options for reforming Social Security off the table.

Okay, he has left one option on the table. I suppose he could be thinking of empowering the government with investing our Social Security money in the private market with our Social Security money--an idea that was was soundly rejected by the Senate in the past. More likely, Chairman Baucus really doesn't have any plan to address Social Security's problems. He is content to let the program drift towards bankruptcy, which would make tax increases inevitable.

This is what passes for leadership among Democrats?

IWF in the News: Personal Accounts, Not Tax Increases

Mon, 05 Feb 2007 00:00:00 EST

National Review Online

By Peter Ferrara

When I began working on the issue of Social Security, at Harvard Law School in 1978, Pete Peterson, a prominent conservative who had been secretary of Commerce under President Nixon, was arguing that the problem with the program was that the benefits were too high. With the average widow's benefit at $500 a month back then, Peterson-- a Wall Street banker to boot-- didn't get too far with his argument.

I developed an opposite argument, one that drew on themes raised by Barry Goldwater and Ronald Reagan. My position was that if you evaluated Social Security taxes and benefits in the light of market investment returns, the program was becoming a bad deal for working people. The benefits, particularly in the future, were too low, not too high.

Around the same time, José Picera started making the same argument in Chile, which enacted historic personal-account reforms in 1981. For a year he explained to Chilean television audiences how workers would get a much better deal with personal accounts.

In time I developed this theme into a positive, even populist, reform model in books, studies, and articles. Real-world Republican and conservative candidates began campaigning on this politically seaworthy approach starting in the late 1980s. By the late 1990s, they were winning election after election on these very grounds. Pollster John Zogby summarized the 2002 elections by saying that in every contest where personal accounts were a central issue, the candidate in favor of the accounts won.

These successful candidates didn't say we need to cut future benefits, or raise taxes, or lift the retirement age. They said workers would get a better deal through personal accounts, and even contrasted this approach with the bad alternatives of tax increases and benefit cuts. These candidates included President Bush, who campaigned on personal accounts in particular in 2000.

After taking office, however, Bush hired for his White House Social Security staff inside-the-Beltway, pain-caucus types who never really understood this positive approach to reform. For these policy makers, the meat of Social Security reform was benefit cuts, and if necessary tax increases, to balance the long-term Social Security budget. Personal accounts became the dessert that hopefully would convince voters to ingest the castor oil of benefit cuts and tax increases first.

By contrast, the original goal of personal accounts was to massively reduce long-term entitlement spending by shifting benefits to the private sector while giving workers a much better deal. A balanced Social Security budget would be a byproduct of this process. Critically, if you are shifting benefits to the private sector, there is no longer any need or scope for the extreme negative of cutting future benefits. Instead you can talk about the extreme positives of greater benefits and the much better overall deal provided by personal accounts.

I argued after Bush's election in 2000 that if he started talking about cuts in future promised benefits, the focus on personal accounts and their enormous positives for workers would be lost. I argued that Democrats and liberals would respond by insisting that any future benefit reductions would have to be "balanced" by tax increases. I argued that the Democrats also would insist that if they ever were going to agree to future benefit reductions, that the president would have to forego personal accounts as well.

All of this has now come to pass.

The president first endorsed massive reductions in future promised benefits through so-called "progressive price indexing." This brought us back to the old Pete Peterson argument that benefits are too high. Then, to accommodate Democrats, Bush was forced to insist that all negotiating points, including tax increases, were on the table. And now, iron-fisted Democrats are insisting that they will never consider real personal accounts that substitute for any part of the old, 1930s framework.

Robert Novak reported on January 8 what has since been reported elsewhere: "Democrats refuse to talk with Republicans about personal accounts �carved out� of the present system. Indeed, a 'carve out' is now a dead letter. New personal retirement accounts could be passed only as an "add on."

Consequently, reformers who are arguing that tax increases must be on the table if there is any chance for personal accounts remain hopelessly behind the curve.

Just last week, Rep. Michael Pence penned a brilliant article in the Wall Street Journal showing the way forward. He rejected any tax increases as part of a Social Security reform package. Pence argued that the only hope for future reform is to focus on "improving the system so that it offers a better deal to younger Americans through personal savings accounts."

Then, in an article entitled "The Pence Tax Increase," Carrie Lukas, vice president for policy and economics at the Independent Women's Forum, said that if Pence will not support a tax increase to close a Social Security reform deal with the Democrats, he should be held responsible for all future tax increases that will be necessary due to the failure to reform Social Security now. But Lukas needs to hold Karl Rove and President Bush equally accountable, since Rove has adamantly assured conservatives that the president will not support a tax increase as part of a Social Security deal. Then there is the problem of those pesky Democrats who have rigidly insisted that they will not consider personal accounts, even in return for a tax increase.

It's time for a reality check. As set out above, personal accounts will come neither through tax increases, nor cuts in future benefits. Quite to the contrary, the drift toward these politically poisonous alternatives is what has cratered the campaign for personal accounts. If blame is to be handed out, blame those who misled the president down this pain-caucus trail-- they are the ones who should be held responsible for any future tax increases due to the failure of reform at the present time.

The only way to achieve the goal of personal accounts is to go back to the positive and populist reform model on which George W. Bush was first elected to the Oval Office. Reformers in Washington must propose a specific personal-accounts plan that includes no tax increases or benefit cuts and presents obvious and overwhelming benefits to working people. Then they must take their plan over the heads of the Washington establishment and directly to the American people, as President Reagan did successfully time and again.

As Pence wrote in the Journal, "Republicans don't have to pass a bad Social Security reform bill. If we lack the votes now to pass legislation that will actually preserve the system and protect our nation's economic expansion, we would be wise to spend the next two years seeking to win the debate and leave a foundation of arguments that will not unravel."

Better personal accounts late, than never.