Staff Columns: Personal accounts make no cents to social security
When I was a small child, my parents started a small mutual fund to pay for my college education. They knew that stocks, over the long term, have a better rate of return than bonds or savings accounts. But they also knew that stocks were a risky investment. They settled on a mutual fund that invested in large, growing companies in order to reap the benefits of higher returns while minimizing the risk. Every month, they invested $50 and each year saw higher and higher returns. Until I graduated high school.
The summer I graduated high school was also the summer the technology bubble burst and the stock market lost some of its value. My small mutual fund fared worse and lost 2/3 of its value in just a few months right before I enrolled in my first classes. When I actually needed the money, it was gone.
President Bush is currently in the middle of a massive campaign to convince Americans that Social Security is in trouble and that personal accounts should be part of the solution. The president wants to allow American workers to be able to invest a fraction of their Social Security taxes in a small selection of stock and bond funds. He believes that this will allow Americans to have more control and greater freedom over their retirement plans. He also believes that people will benefit from the long term growth of the stock market, giving them more income than what the government alone could provide. This plan, however, replaces the security of guaranteed government payments with the volatile mood swings of the markets.
The irony in all this is that Bush admits that private accounts by themselves will not make Social Security solvent. What Social Security actually needs is some combination of tax increases and benefit reductions to shore up its long term health. Yet, Bush’s plan only calls for the creation of private accounts. He has left the hardest problems up to a reluctant Congress.
Perhaps this is why Bush is having trouble winning even his fellow Republicans over to his plan. No one wants to raise taxes or cut benefits of any kind, especially for a program as popular and successful as Social Security. By not creating a plan that deals with these core issues in Social Security reform, Bush has staked out a position that allows him to take credit for any victory and easily disavow any failure. This is not leadership, it is politics.
Social Security is not in a crisis, but its long term health is questionable. Something needs to be done now to ensure that our generation will have the same benefits available to us that our parents and grandparents have had for 70 years. Changes must be made and our generation must have a voice for we will be the ones who must live with the decisions of today 70 years from now.
Private accounts, however, are not the solution. Event the president has said that they will not solve the problem. Rather than making people more responsible for themselves and limiting government handouts to individuals, personal accounts will only make these programs more necessary. Just like my mutual fund lost its value just when I needed it, private social security accounts could loose much of their value just as we get ready to retire, just when we need it. There is no guarantee on the stock market: its long term performance is great, but there will always be the gamble that your money won’t be there when you need it the most.
Today’s students have an important role in this debate over Social Security. Your voices matter all the more because of the long term nature of these decisions. Write your Republican congressmen and thank them for standing strong against Bush’s plan to replace the security of a government guarantee with a gamble on stocks. We need to save Social Security for our generation and not replace it with Social Insecurity.
Brandon Holcomb
Graduate Assistant
The Colonnade
Posted by Colonnade Archives
on Apr 1 2005. Filed under Opinion.
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