November 10, 2007

Thompson Goes Bold On Social Security

People have questioned Fred Thompson's campaigning style since his formal entry into the presidential race two months ago, but few will question his courage after his latest policy pronouncement. Thompson continues his campaign of ideas by unveiling a comprehensive Social Security reform plan that relies heavily on private accounts and recalculation of benefits. As the Washington Post notes, Thompson becomes the first candidate to offer a detailed plan to rescue Social Security from oncoming collapse:

Republican presidential candidate Fred Thompson yesterday proposed slowing the growth of Social Security benefits and creating voluntary, government-matched savings accounts, becoming the first candidate of either party to offer a detailed proposal to fix the nation's retirement system.

Thompson's plan draws on ideas favored by conservatives: a reduction in benefits, rather than an increase in payroll taxes; and a shift toward private accounts, rather than government-provided payments. As a result, the proposal drew immediate criticism from liberals, who said it would severely reduce Social Security benefits, especially for low-income older Americans who rely most heavily upon them once they reach retirement.

Under Thompson's plan, Americans would be offered the option of contributing an extra 2 percent of their salaries to a retirement savings account. As with many corporate 401(k) plans, the government would contribute $2.50 for every dollar that an individual saved, up to a maximum of $12,000 per year.

To pay for the savings accounts and to help keep Social Security solvent, Thompson would change the way benefits are calculated. Over the next 50 years, benefits would grow much more slowly under Thompson's proposal than in the current system.

No one can accuse Thompson of ducking the tough issues. In fact, Thompson's bold move on Social Security might put pressure on the rest of the field to start formulating their own detailed solutions. On the other hand, most of them will probably recall the beating George Bush took after he won re-election for offering a mix of privatization and benefit recalculation. They may let Fred run with this issue for a while first to see whether he survives the storm it brings.

Thompson has already generated some heavy winds from liberals. Barack Obama has already called it a broken promise to America's seniors. Without offering any specifics, Obama insisted that higher taxes on higher-income Americans would "shore up Social Security for generations to come." That more or less echoes what other Democrats have offered thus far; in fact, that's about all any of them have said about Social Security in the entire race. The Brookings Instution, a center-left think tank that has pushed for some type of entitlement reform, objects to both price indexing to scale benefits and private savings accounts, insisting that people will simply not save money on their own -- the 25-year flood of IRAs and 401Ks to the contrary.

Without specific counterproposals, this may wind up like 2005 all over again, with Democrats insisting that Social Security needs no fixing at all. Thompson sounds like a man prepared to do battle on that front, saying "It is unsustainable as presently constituted, and everybody knows it." Everyone knows it, but few are prepared to take political risks to reverse the coming debacle. At least Thompson has a plan. For those who wonder why Thompson's candidacy matters, this may be the moment of enlightenment.


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