Easy for him to say

A Retiree Trying to Save His Life's Work

MITCHELLVILLE, Md. — Like many other retirees, Bob Ball is concerned about what's going to happen to Social Security.

From his cluttered office in his otherwise tidy retirement community home, he has proposed his own formula for shoring up Social Security's financial future. His relatively modest tax increases and benefit cuts, combined with some government investment in the stock market, offer a contrast to President Bush's call for individual investment accounts, which Ball abhors, and steeper curbs on traditional benefits for many future retirees.

But Ball's goal isn't preservation of his monthly benefit check. Instead, he is defending the program that is his life's work.

Before the first monthly Social Security check was delivered in 1940, he was already working as a 25-year-old clerk in the Newark, N.J., Social Security office for $1,620 a year.

He shot up through the bureaucracy to become commissioner of Social Security for three presidents. On his watch, Social Security became the biggest and most popular benefits program. And in 1983, when he had been collecting retirement benefits for four years, he was a key negotiator of the law that rescued Social Security from the brink of insolvency....

How easy for him to call for tax increases and benefit cuts! He's been retired for over two decades, so any "modest" increases in the payroll tax -- and be wary anytime a liberal talks about a "modest" tax hike -- won't affect him. Moreover, since he was a career bureaucrat, he probably continues to receives a generous pension from the federal government. Presumably he received a nice salary, probably far above the American average, so how much did he invest in stocks and bonds? In other words, unlike a lot of Americans, he doesn't have to depend on Social Security alone for retirement.

Let the benefit cuts apply to his own Social Security benefits, and let him give up his pension to live off the new Social Security ratio. I expect he'll change his tune faster than the Roadrunner outruns Wile E. Coyote.

Remember what's been said before: if you want the ultimate, perfectly solvent retirement system, then eliminate pensions for the President and Congress, and make them depend on Social Security alone. They'll fix things right quick.

But now the proposals of No. 43, George W. Bush, have prompted the 91-year-old Ball to try to make his voice heard in Washington once again to fight proposals that, in his view, would unravel his life's work.

What Bush has proposed "would ruin the whole system," said Ball, a physically imposing man whom age has not bent. "It's a fundamental, philosophical policy shift."

President Franklin D. Roosevelt, Ball said, wanted a government-provided benefit that would replace a fixed percentage of a workers' pre-retirement income. The vision was of a benefit based not on need — which would carry the stigma of a welfare program — but on past earnings.

"FDR talked about a basic retirement income that would guarantee a certain replacement rate for everybody to build on," Ball said. But the individual investment accounts proposed by Bush, which would allow younger workers to use some of their payroll taxes to ride the ups and downs of the stock and bond markets, would undermine that guarantee, he said.

Isn't his an interesting admission? Social Security was supposed to be just a "basic retirement income," i.e. a supplement. Ball does not mention, however, that the payroll tax is now so onerously high -- since 1983, when he personally helped hike it -- that most people are left with hardly anything to save.

Recently I blogged about telling a co-worker, who's roughly my age, that we'd do so much better with private accounts. He and I of all people should favor private accounts, because we still have four decades during which we could save 12.4% of our stated income. (Those who think employers pay the "matching contribution" probably also believe that businesses pay taxes.) At the March 15th Social Security debate in Manhattan, Michael Tanner pointed out that Social Security recipients get an effective 1.4% annual return from what they pay in. His opponent, Paul Krugman, could only protest that, well, the stock market goes up and down, it has no guaranteed returns, and oh, did he mention the stock market could go down?

Well, Krugman isn't much of an economist if he can't see that the U.S. stock market has an overall upward trend. There are bear markets, to be sure, but over a couple of decades (let alone 40 or 50 years), properly diversified holdings have nothing to worry about. As Tanner said in the debate, it's hard for Americans not to do better than Social Security's paltry return: "Now, if we can’t beat 1.4 percent by investing privately, we’re in the wrong country. We are certainly betting against the American economy if over the next 40 years it’s not going to produce a one and a half percent rate of return from private investment."

And Bush's suggestion that benefits be reduced from now-promised levels for future middle-income and wealthier retirees, Ball said, would eventually leave all with about the same benefit now promised to the poor.

"For the last 70 years," Ball said, "we've been operating a system that's useful to every American family. Bush's plan now says we'll maintain the benefits promise only for the poor. We're asking everybody except the poor to accept the idea that the more you have paid in to the system, the more your benefits will be cut."

The result, he said, would be a loss of political support for Social Security.

I will say that the "means test" is morally wrong, and I'm disappointed Bush would accept it as a concession. Someone who pays more into Social Security shouldn't have any benefit cuts, otherwise Social Security becomes even more of a government-coerced redistribution of wealth.

Still, some liberals still miss the point when they warn how "private accounts mean benefit cuts." Guaranteed federal benefits can be cut because the separate private accounts will replace (and even exceed) the cuts. I always thought that concept was simple.

Ball has his own proposal, which includes dedicating the proceeds of the estate tax to Social Security and using a more precise — and stingier — measure of price inflation to determine annual cost-of-living adjustments.

His most controversial proposal: let the government invest some of the Social Security trust fund's surplus in stock index funds. Although this would allow the government to profit from expected — but not assured — market gains, critics have warned that it could also open the door to government meddling in corporate affairs, despite safeguards that Ball has proposed.

Bad idea, and really bad idea. The last thing we need is the federal government "making and breaking" corporations by investing trillions of dollars in the stock market. I support private accounts to an even more drastic measure than Bush's plan: drastically cut the payroll tax, and tell people to save that money. Tell them that if they don't, it's very simple: they're going to starve in retirement, and the government won't bail them out. Even squirrels know enough to save a large surplus for winter.

The estate tax is already bad enough (again, something that taxes being successful). First, using the estate tax for Social Security means that Congress will have to cut spending elsewhere or raise other taxes. There's no way around this. Second, using the estate tax to shore up Social Security is like Krugman's proposal of rolling back Bush's tax cuts to keep Social Security solvent. Both are heavily graduated taxation (which was one of Marx's planks of the Communist Manifesto). Both are an admission that Social Security can't pay its own way, that it needs help from the "General Fund." From the very beginning, the payroll taxes were supposed to be able to pay the benefits paid out.

Ball of all people should know that the 1983 "reforms" (phrasing it generously) were supposed to prepare Social Security for the Baby Boomer problem. It didn't, because Congress borrowed every cent in the trust fund, blessed by and mandated by federal law. Now we have 11 years (now through 2017) to do the work of 34 (1983 through 2017). As they say, the clock is ticking.