The Oklahoman

Oklahomans may be hearing a lot about President Bush's proposal to reform Social Security. With all the rhetoric flying back and forth, what you may not be getting are the real reasons we are having this discussion. Simply put, this is a generational problem.

Ten thousand baby boomers turn 59 every day. In just three years, the first of 77 million boomers will begin reaching early retirement age and will become eligible for Social Security benefits. When that happens, they will stop paying into Social Security and will begin drawing money from it. As the boomers transition into retirement, the number of retirees in America will double and Social Security's costs will soar out of control.

Some want us to believe Social Security won't cause any problems for another four or five decades, until after the last of the U.S. Treasury bonds in the Social Security Trust Fund run out. While it is true the baby boomers in Oklahoma are unlikely to see their benefits cut in the short term, the problems for Oklahoma workers begin much sooner.

In just 13 years, Congress will have to start making difficult decisions about which taxes to raise or which programs to cut to redeem the bonds in the Social Security Trust Fund. Between 2018 and 2041, Congress will have to find an extra $2.3 trillion, in addition to what will already be collected by the Social Security payroll tax. And even after taking the extra $2.3 trillion, the program can only afford 74 percent of benefits.

That means for people of my generation, after we have given more of our tax dollars and tightened our belts for our entire working lives to ensure the government fulfills its promises to our parents, we will be thanked by being told we will have to accept a fourth less than we were promised. What a deal: Instead of a pat on the back we'll get a punch in the gut!

Bush's proposal seeks to find a way to fulfill Social Security's promises for every generation. No changes for anyone age 55 and older. But for younger workers since benefits cannot be fully paid as promised under current law, the president recommends:

Gradually constraining the growth in traditional, government-funded Social Security benefits for today's youngest workers.

Allowing younger workers to open a personal retirement account invested in broad-based funds that mirror the market as a whole. When combined, the two reforms eliminate the program's long-term debt while still providing benefits approximate to what the current system promises.

Many have raised concerns about the plight of inexperienced investors, the prospect of unscrupulous investment firms and the danger of high administrative fees. I share them. Fortunately, there is a perfect model operating successfully in the U.S. today that shows how these concerns can be addressed.

More than 3 million federal employees -- from your postal carrier to your members of Congress -- invest in a program called the Thrift Savings Plan (TSP), which is essentially a 401(k) plan for federal workers. TSP participants choose from among five carefully constructed index funds with different degrees of risk and reward. The government signs a contract with a single institutional investor who must manage the money under strict guidelines. As a result, administrative fees are low and inexperienced investors are well protected.