Monday, March 07, 2005

Notes on Private Accounts

On the topic of Social Security reform, it is quite clear that change must come. The means of that change are the subject for upcoming debates. The initiative from President Bush involving private accounts has been met with considerable criticism from both sides of the aisle.

On the Republican side, Senator Chuck Hagel recently announced his own plan. (Query: Does the “Hagel Plan” just sound better to his ears?) This plan allows private accounts, but cuts back the eligibility age to 44. This means that folks older than 44 are stuck with the old plan. (Note to my colleagues Ernie and Ralph: too bad for you!) Why this should be more attractive to the public is mystifying to me. If someone told me that if I died prematurely, the thousands of dollars I had paid into the system are effectively lost, rather than passed on to my heirs, I would be a little disappointed. (Actually, a lot disappointed.)

On the Democratic side, there has been stonewalling about any form of private accounts. These folks think that an investment in stocks and bonds (even through mutual funds that diversify investments amount hundreds or thousands of companies) are too risky. Excuse me, but consider the alternative: are you willing to trust future politicians to ensure that they will make the workers who come after you pay more taxes to fund your social security benefits? For my money, I would certainly rather take my chances with the market. (Of course, Federal employees get this choice in their retirement plans -- do they know something that the rest of us don't?)

One exception to the Democratic stonewall is Joseph Lieberman. An interesting story about him appeared in the March 7, New York Times. Senator Lieberman has suggested he would be willing to work with President Bush to find a solution. For that, he has gotten nothing but grief from his party. Thank you, Senator Lieberman. You have my respect, sir.

Edward A. Morse
Professor of Law
Creighton University School of Law

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