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Contributors
J.F. Kelly, Jr. - Contributor
J.F.
Kelly, Jr. is a retired Navy Captain and bank executive who
writes on current events and military subjects. He is a resident
of Coronado, California. [go to Kelly index]
 Bush
Tackles Domestic Agenda
Social Security debate…
[J. F. Kelly, Jr.] 1/21/05
President
Bush has announced his intention to aggressively pursue his
domestic agenda during his
second term. His enthusiasm is refreshing but the obstacles are
formidable since the war on terrorism and the situation in post-election
Iraq figure to occupy a large amount of his administration’s
time and energy.
Reforming
Social Security to include the partial privatization of the
system
for younger workers appears to be first among his
priorities. I certainly wish him well but I wouldn’t bet
the farm on his chances for real success. I do appreciate the
need for some kind of restructuring. And the idea of giving younger
workers some method of building wealth that they actually can
own is commendable but that really isn’t what Social Security
was intended to do; namely to provide a modest source of assured
retirement core income in old age.
I understand
also that optional investment vehicles will be limited to conservative
investments such as indexed stock mutual funds
and bond funds, perhaps with
inflation protection for the latter. But it is a mistake to refer to these
investments as “safe” as many proponents of Social Security privatization
do because “safe” is a relative term. There is risk involved in
even these investment instruments. I further understand that these options
are intended for younger workers so that their portfolios have an opportunity
to benefit from the market’s historical, long term, positive trend.
But historical trends do not ensure future performance. For most investors,
success
comes from patience and persistence; traits that are not universal in the
population, young or old, and the required stringent restrictions on accessing
the proposed
private portions of Social Security accounts will not be popular, especially
when markets are in steep decline.
Aside from
the considerable cost of implementing reforms and the diversion
of Social Security
taxes to private accounts which
cannot be accessed by the government, I am apprehensive regarding
the wisdom of encouraging or even allowing younger workers to
essentially gamble with a portion of their Social Security benefit.
I don’t wish to sound patronizing, but is it really realistic
to expect people with little if any investing experience, who
can’t prepare their own tax returns, usually don’t
bother to vote and when they do, have difficulty following simple
ballot instructions, to make informed investment decisions requiring
at least a cursory amount of research and enough reading skills
to understand prospectuses, which are incomprehensible to most
university grads?
Again, I realize that investment choices would be limited and
conservative and perhaps voluntary and that withdrawal of funds
would be restricted to carefully defined emergencies but none
of these safeguards will insure success and it is reasonable
to expect that there will be losers. Even if they are few in
numbers, expectations may exceed actual performance and individual
results may vary widely, creating dissatisfaction and demands
for further reforms.
Retiree
advocates such as AARP, joined by many Democrats in Congress,
are firmly
opposed to such changes. It is to Mr. Bush’s
great credit that he is willing even to touch what has been described
as the third rail of politics. However, there are approaches
other than privatization that should be tried first. It hardly
needs to be said that had the federal government kept its hands
off what is laughingly called the Social Security Trust Fund
instead of spending each year’s surplus, we’d have
less of a problem today. Still, there would be an inevitable
day of reckoning with the ratio of workers to retirees declining
as it is. Reduced benefits should be ruled out. A promise is
a promise. But annual benefit adjustments should be indexed to
the cost of the living index, not the wage index that has grown
at a faster rate. Also, the eligibility age for commencement
of benefits should be further increased to reflect the fact that
we are living longer, more productive lives.
While admittedly, Social Security requires some degree of restructuring,
Medicare poses an even greater and more immediate problem. Yet,
Mr. Bush seems to believe that his recently enacted senior drug
benefit is enough of a reform for now. It is not. Without reform,
Medicare will be bankrupt long before Social Security. If current
welfare spending trends continue, we will follow the path of
the European welfare states with welfare spending leaving insufficient
budget for defense or much of anything else, for that matter.
Adding to
the rising welfare costs in this country are millions of illegal
aliens
who rely on emergency medical facilities for
their primary source of medical care. The welfare cost of illegal
immigration in the United States is enormous. Add to these costs
which fall heavily on California and other border states, the
money spent on futile and half-hearted measures to patrol our
borders, the cost of welfare fraud, tax evasion, apprehension,
incarceration and deportation, legal expenses to insure that
the “legal” rights of illegal aliens are not violated
and the immense cost of educating their children in public schools.
The social costs of illegal immigration are more difficult to
quantify but they are real nonetheless.
If Mr. Bush really plans to focus on a domestic agenda, he
might consider rearranging his priorities, since the pressure
of international events will greatly restrict the time he can
devote to any of these difficult projects. Start with an immigration
problem that is out of control and needs to be totally restructured
and competently managed. Tax simplification belongs near the
top of his list. The greatest challenge of all, in my view, will
be how to provide affordable medical coverage to all our citizens
in need without serious degradation in the quality of care. tOR
copyright
2005 J. F. Kelly, Jr.
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