THE FOCUS IS ON OWNERSHIP
October 29, 2004
President Bush has quietly pieced together a domestic policy vision, known as, the "Ownership Society," that has a chance to be revolutionary, says John Goodman, president of the National Center for Policy Analysis.
The prime example is Bush's approach to Social Security. Once thought to be untouchable, he appears to grasp that the fundamental flaw of the program's pay-as-you-go structure cannot be sustained with the demographic realities of longer life expectancies and lower birth rates. The 77 million baby boomers will soon begin retiring:
- By 2018, Social Security will have to spend $16 billion more on benefit checks than it collects in payroll taxes; the shortfall will grow by leaps and bounds.
- By 2020, the combined deficit in Social Security and Medicare will claim 1 of every 4 income tax dollars.
- By 2030, it will claim 1 of every 2; sometime after mid-century, promises we have made to seniors will consume the whole budget.
There are really only three options to fix the government's ailing retirement scheme, says Goodman: 1) Raise taxes to draconian high levels; 2) drastically slash benefits; or 3) fundamentally reform the system.
President Bush proposes fundamental reform, by allowing younger workers to divert some of their payroll taxes to personal retirement accounts they would own and control. Over time, the balances in these accounts would grow, offsetting some of what the government would otherwise have paid them at retirement. This would reduce future government obligations and therefore future tax burdens. Gradually, we would replace our pay-as-you-go approach with a funded system, under which each generation pays its own way, says Goodman.
Source: John C. Goodman, "The Focus is on Ownership," Philadelphia Inquirer, October 28, 2004.
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