The presidential candidates' debate over the future of Social Security has put the issue at center stage again.
Both front runners agree that we must ensure a sound financial future for Social Security. Nothing can be more important than for all Americans to have a strong retirement system that will be there for tomorrow's retirees as it is for today's.
Any solution for Social Security should preserve the intent of the original system while incorporating a new component to give people more control over their retirement assets, including greater choice and more flexibility in deploying them. This new feature is highly desirable because it will increase national savings, strengthen the economy, and ensure the solvency of this federal program for decades to come.
Social Security's reform should be guided by five principles:
- Any solution should include some type of personal savings account for individuals. Such accounts would boost net savings and introduce more Americans to the basics of saving and investing.
- Basic guarantees must be preserved. Our country made a promise to the American wage earner - this promise must be kept, especially to those who are now retired or nearing retirement. The promise includes preserving the right now extended through Social Security to change jobs without losing the system's benefits, assets, or basic rights. No reform may change that promise; it should only improve upon it.
- People must have choices. If working families are to invest through the Social Security system, they should be allowed to make choices that reflect their differing circumstances. Families of different ages, incomes, and preferences will have different approaches to investing for the future. We must recognize and allow for these differences.
- No new burdens. Changing the system must not become a pretext for creating new burdens for employers. We should strive for a system that would minimize reporting and paperwork burdens. Further, there should be no new payroll taxes.
- The costs must be minimal. Investing in securities to earn a higher return makes sense only if the system's costs don't outweigh its benefits. The wage earner's assets and benefits should not be eaten up in administrative fees. This means that the discipline of competition must be built in to any system for private investment of Social Security resources.
Much work has been done to examine the effectiveness and costs of these and other proposals. By making Social Security a national issue in the 2000 election, the candidates have opened the door to quick action on this vital issue.Our next challenge is to build a consensus, embrace specific changes, and work together to enact measures that will put Social Security on a sound financial foundation.
Mr. Lackritz is president of the Securities Industry Association.