Crisis? What Crisis?

President George W. Bush is painting Social Security's future with the darkest of colors.

The president says the nearly 70-year-old retirement system is on the verge of collapse, that a sudden bulge in the number of retirees is going to bankrupt the system and that the only way to fix it is to open it to the marketplace.

Social Security is a pretty simple system. Workers pay 6.2% of their income, an amount matched by their employers, into Social Security, up to $90,000 for the year, with the promise that the system will cut workers monthly checks upon their retirement after the age of 65. The money is then paid out as benefits to current retirees.

Under almost any model, Social Security has been a huge success. Roger Lowenstein, writing in the New York Times Magazine, described it this way:

"The program is a model of efficiency; expenses are low, as pension plans go, and participation is near universal. Benefits rise with the level of earnings, but they are tilted toward progressivity, so that those at the bottom get more in proportion to their earnings and those at the top get less."

But the key, ultimately, is that "Social Security also delivers a considerable nonmonetary benefit: People who have contributed throughout their working lives know that, regardless of the ebb and flow of their careers and, indeed, of the stock market, a guaranteed pension awaits them."

And that should be the key to this debate. In its broad outlines, Social Security remains and will remain an effective safety net for aging Americans for years to come.

Look at the numbers: Social Security has been running at a rather large surplus for years, with the money supposedly set aside in a trust fund that was supposed to be used if and when the system goes into deficit. That is supposed to happen in 2018, when the first of the baby boomers begin retiring en masse. The Social Security Administration estimates that the trust fund should be solvent for another 30 years after that, though that is nothing more than an estimate.

In fact, as Lowenstein writes, Social Security's actuaries have been painting a more optimistic portrait of the system's future, pushing back the day of reckoning by 13 years.

And yet Bush persists in painting an impending cash-flow problem as a major crisis, using the kind of heightened rhetoric designed to scare Americans into doing something drastic -- i.e., turn a portion of their Social Security money over to the stock and bond markets.

Under the Bush plan, workers would be allowed to shift up to about two-thirds of their contribution (about a third of their total taxes), up to $1,000 annually, into private accounts that could be used to invest in mutual funds. The president and the folks on Wall Street paint this transfer in optimistic terms, saying that stock market returns have been larger and are likely to be larger than what the government could guarantee under Social Security.

The key here, of course, is that Social Security offers a guarantee, while retirement accounts do not. Dean Baker of the Center for Economic Policy Research wrote in a December opinion piece in The Nation that the president's claim is mostly "bad math, faulty logic and deception."

"Advocates of private accounts assume that the stock market will give the same returns in the future as it has in the past, even though price-to-earnings ratios in the stock market are far higher now than in the past, and the Social Security trustees project that profits will grow at about half the rate they did in the past," he wrote.

Translation: Returns on these investments are not likely to offset the cuts in benefits that will be necessary after the creation of private accounts.

There are better -- and simpler -- fixes available. We could eliminate the $90,000 income ceiling, which would make the system fairer and would boost revenue. We also could tweak benefits, possibly applying a means test.

We also, as former Treasury Secretary Paul O'Neill suggested in an op-ed in the New York Times, could offer government-supported savings accounts -- but only as an adjunct to the existing system, something to augment retirees' incomes.

What we can't do is succumb to President Bush's rhetoric of crisis. Social Security is too important and has been too successful to allow it to be dismantled by the president and his cronies.

Hank Kalet is a poet and managing editor of the South Brunswick Post and the Cranbury Press. Email

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