Reform Social Security now!

Pat Toomey on the Social Security black hole:

I’m going to save you the trouble of reading all 218 pages of the Social Security Administration’s “2007 Annual Report of the Board of Trustees” by summing up the dizzying details in six words: Social Security is still going broke.

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The benefits of personal accounts over the current system can be illustrated with a numerical example. Let’s take a hypothetical 25-year-old male earning $32,000 a year with average wage growth. Under the current system, he will receive $2,780 per month when he retires, or a measly -0.72 percent return on his contributions (according to the handy calculations of the Heritage Foundation). Now imagine that our hypothetical worker invests the retirement portion of his payroll taxes in a bundle of stocks and bonds, earning a modest 4.9 percent return. When he retires at the ripe age of 67, he will have an account with his name on it worth $1.1 million, or $9,546 per month, ready to be spent on that cabin in the mountains he always wanted.

So the debate over Social Security comes down to one simple question: Would you rather have $2,780 a month in your retirement or $9,546 a month?

The funding crisis highlighted by the 2007 report presents us with an opportunity to fix our broken retirement system. But patching up Social Security with an old rag and a hastily sterilized needle will have us back in the same situation ten years down the line, and the worse for wear. Fixing Social Security means not only funding it, but creating the best retirement system possible given our limited resources.

Of course, the Democrats will oppose personal accounts, and will no doubt resort to the same kind of demagoguery they used in 2005 to sink any attempt at reviving the proposal. If Republicans are serious about achieving real, market-based Social Security reform, they will have to effectively communicate to the American people that the only real solution is personal accounts, while the boogeymen are the politicians who don’t trust the people enough to make their own decisions.