Imaginary WMD and Social Security crisis

Is there a "Social Security crisis"? We have received dozens of emails from our readers asking this question. While President Bush has tried to create a crisis (as he successfully created a WMD crisis), looks as if Americans are smarter this time. Only 14% of Americans buy his argument (according to a Zogby poll commissioned by Cato Institute). Most non-partisan expert think that like many other aspects of the American economy, Social Security may need major work but not at the speed President Bush wants to do. After the failure of his Iraq strategy, Bush is also facing a major credibility challenge since most things that he says are hardly believed by anyone who bothers to stay informed. (Related article: Bush's real agenda for privatizing Social Security)

Ronald Lee, director of University of California Berkeley's Center for the Demography and Economics of Aging (He has served on the technical advisory panel for the Social Security Administration and does Social Security projections based on demographics), says, "It is important to realize there are two separate issues. One is that there is a long-run imbalance to Social Security finances. The other is whether we want to move toward a privatized system. The long-run imbalance has to be addressed one way or another. The trust fund won't fall close to zero for another 40 years, maybe 50 years, depending on what projection you're looking at. You might or might not want to call this a crisis, but it is the case that we have to do something sooner or later. The earlier we do it, the easier it will be. On the other hand, it means future generations of participants will bear more of the costs of fixing the problem." (Related article: Why Bush wants to privatize Social Security?)

His colleague Alan Auerbach, professor of economics, who served in the early 1990s as deputy chief of staff for the U.S. Joint Committee on Taxation, which advised Congress on tax policy, agrees. According to him, "It needs to be attended to. People who argue that it's not as bad as some people say are right, in some sense, because it is a manageable problem. It's not something where the sky is falling and we can't do anything about it. We certainly could make no significant changes in the Social Security system and fix it – that is, increase the retirement age a little bit, increase the income subject to the payroll tax a little bit, do a variety of other little things. That's pretty much the approach they took in 1983. What a lot of the debate is about now is whether this crisis – however big it is – should also be used as an opportunity to make major changes in the Social Security system, particularly privatization or partial privatization."

Nancy Pelosi, the House Democratic leader admits that Social Security is not in perfect shape, but America has the time to be deliberate and do it the right way - an approach that President Bush does not like. As many experts start to compare his poor Iraq strategy (executed in a hurry, no debate, without support, risks ignored, incomplete analysis), it is becoming obvious that privatization of Social Security might turn out to be as big a failure as the Iraq war. While Iraq war has cost us about $200 billion, trillions of dollars are at stake in the Social Security privatization initiative. Pelosi says, "We can solve the long-term challenge without dismantling Social Security, and without allowing this Administration's false declaration of a crisis to justify a privatization that is unnecessary, unaffordable, and unwise. To be sustainable, any long-term solution must be bipartisan. And as a first step, we must work off the same set of numbers and the same set of goals." (Related article: Retirement incomes to fall under Bush's privatization plan)

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