Where the money is

May 3, 2006

The report from the Social Security trustees this week contains little new. The real story is that the Bush administration and its allies in Congress continue to botch an opportunity to devise a bipartisan solution for both Social Security and Medicare.

The accompanying chart shows why: Any serious proposal has to retain revenue that would be lost if the tax cuts proposed by the administration and passed by Congress are made permanent. Retention of this money was a precondition for the preliminary Social Security rescue plans that President Clinton and economist Martin Feldstein proposed in the late 1990s. Nearly a decade has been wasted, and revenues have gone to tax cuts that could have shored up the retirement system.

President Bush diverted attention from a consensus solution by trying to partially privatize Social Security last year. In an insecure economy, the monthly Social Security check is the only source of guaranteed income available to almost all retirees. Americans have no appetite for diverting some of their Social Security taxes into risky stock-market accounts.