Social Security's Foggy Future

Bank of America building, its top obscured by the rain last Tuesday.

Campaigning against the moral failings of the previous Administration, the Southern businessman-turned-Governor wins a tightly contested Presidential election. Drawing on Christian principles, he proclaims a new direction in American foreign policy—the promulgation of human rights. The election has given his party comfortable majorities in both houses of Congress, and he decides to tackle a complex problem that affects all sectors of the economy. He concludes that the American people should pay a price now in order to avert a crisis that is decades away. His critics aren’t sure the crisis, or even a problem, exists.

In the litany of failures that marked the Carter Presidency, Mr. Carter aimed high and foundered, not because people didn’t trust his character—he famously and credibly said “I will never lie to you”—but because they didn’t trust his judgment. He was ineffectual in the face of high inflation and unemployment at home and an expansionist Soviet Union abroad. He asked Americans to conserve finite energy supplies by wearing sweaters and turning the heat down. When its citizens were taken hostage in Iran, the mightiest country on Earth could do little more than wring its hands. He was shown the door in an election that wasn’t close.

In contrast with Mr. Carter, President Bush acted vigorously—many say too vigorously--to address the problems that he saw facing the nation. A major tax cut, the prosecution of two wars, and the most significant overhaul of Federal security agencies in the past half century were the product of his first term; his second, with its agenda for Social Security, the reshaping of the Middle East, and effort to curb the spread of nuclear weapons, promises to be similarly eventful. Last summer a long-time Republican supporter worried that life under President Bush was too “exciting” and that the American people would turn to someone else in their longing for “normalcy”.

The columnist may have been right about people’s desires, but, even if that assessment were true, a majority in November evidently decided that the surest way to (re)attain normalcy was to re-elect the man who demonstrated that he is not afraid to change the status quo.

For this President the battle over Social Security, however, may be a bridge too far. A brief listing of a few of the big and complex topics that will be touched on in the coming debate:

the effect of different tax and spending policies on the long-term growth of the economy;

the moral and financial obligations that generations have to each other;

the unique powers of the Federal Government to satisfy its debts (Treasury bills, notes, and paper money) by issuing more debt;

the conventional and technical meanings of words such as asset, risk, ownership, and wealth.

As they did when President Carter tried to focus their attention on a dark but distant future of dwindling energy supplies, a weary Mr. and Ms. America’s response to President Bush’s Social Security proposal could be, “do we have to talk about this now?” When the history of this period is written, it may well be said of Mr. Bush that he began the debate that led to changes enacted by later Presidents.

Ideas take time to ripen. The theoretical foundation for the 1981 Reagan tax cuts was laid seven years earlier during the Ford Administration, when economist Arthur Laffer discovered his eponymous curve. And the first significant tax reduction based on Laffer’s theories occurred under President Carter, when the 1978 Steiger Amendment slashed tax rates on capital gains.

My money is on---and will probably be in---personal savings accounts. But the country is not there yet. © 2005 Stephen Yuen