What a month for President Clinton to attempt reopening the national debate on Social Security reform.
Of course, the president's political crisis hasn't stopped scholars of liberal and conservative think tanks from churning out books and papers as they attempt to focus the public's or the media's attention on the issue.
One recent offering - "Countdown to Reform: The Great Social Security Debate" by Henry J. Aaron and Robert D. Reischauer of the liberal Brookings Institution in Washington - paints a clear and vivid portrait of how to fix Social Security's inability to meet liabilities 15 to 20 years from now, when the bulk of baby boomers will reach retirement age.
In an era of partisan and paranoid politics, Messrs. Aaron and Reischauer offer balanced analysis and cogent criteria for answering the following questions:
*How did Social Security evolve into a pay-as-you-go plan?
*What is the best scheme now being debated for meeting Social Security's future unfunded liability?
*Why is maintaining the plan's social objective as important as its fiscal health?
When discussing the potential privatization of Social Security, the authors maintain the system's current defined benefit system creates a social safety net. "It equitably spreads across all of society the risk that people are ill-equipped to handle individually - such as the possibility that asset prices will collapse, that inflation will accelerate, or that a retiree will be blessed with an unusually long life."
Creating a wide tear in that net would be a full privatization of the system, where the federal government would either run or farm out management of a worker's retirement plan through a system of defined contribution, 401(k)-style strategies. Such a privatized scheme would "generate higher sales, administrative and compliance costs than" Social Security can afford.
Rather, the authors opt for strengthening the plan by allowing the government to invest Social Security assets in a broad mix of public and private assets. In a recent speech, Mr. Aaron advocated putting as much as 40% of Social Security assets in equity and fixed-income indexed funds managed by a new Social Security Reserve Board, set up to operate like the Federal Reserve Board and make investment decisions independent of Congress and the president.
The two authors concede the political riskiness of any change. They also see the need for such politically disagreeable measures as higher taxes or benefit cuts as a way to pay for their scheme.
A good reform plan, they insist, must ensure:
*adequate benefits are equitably distributed and represent a fair return on taxes paid;
*risks of long-term pension commitments be shared broadly; and
*administrative efficiency and feasibility are demonstrated.
In the end, Messrs. Aaron and Reischauer come out as unabashed supporters of a system based on a modified current plan.
The 195 pages of "Countdown to Reform," published by the Century Foundation Press in New York, will not please supporters of privatizing Social Security assets. But, in an era of partisan and sometimes paranoid politics, its clarity and attention to detail is refreshing. The book achieves its goal of allowing readers to "understand the issues involved in the debate and to allow (them) to participate more constructively in the discussion."