William J. Arnone, Founding Member, NASI

As the Social Security debate heats up, the outcome may well depend on the language and labels used by proponents of fundamental changes in the program and by those who want to preserve its essential nature.

Let's begin with the Bush Administration and those who seek to alter Social Security significantly. Needing to ditch the term privatization, with its specter of a total shift of the program from the federal government to the private capital markets, the Bush Administration has crafted an overarching theme of ownership. The message to today's workers is that, through accounts that are individual and personal (not private) and a voluntary choice, they will have more control over their future retirement income and will be freed from the risk that the government might take away what is theirs. Ironically, very similar rhetoric was used by President Franklin D. Roosevelt when he signed the legislation that created Social Security in 1935. Noting that the program would be financed with payroll taxes, officially referred to as contributions, FDR commented that this would ensure that "no damn politician" in the future could tamper with the program and take earned benefits away from recipients.

Another linguistic centerpiece of the Social Security reformers is modernization. As they did with Medicare, reformers acknowledge the important role that Social Security has played to provide a foundation of retirement security to previous generations, but they note that the times they are a changin' and that the program is not as relevant to today's and future workers. The economic calamities of the 1920's and 1930's are distant memories, impossible to be repeated in an era of improved government regulations, stronger consumer protections, wider private and public pensions, and an array of tax—favored savings vehicles, like 401(k) plans and lRAs. Furthermore, we're all living longer, aging better and wanting to be more productive in our later years.

An atmosphere of crisis is fed by warnings of Social Security's looming bankruptcy or insolvency, when sometime in the next fifty or so years the program's reserves are exhausted or depleted. The reserves themselves are no longer referred to as trust funds, but rather as paper IOUs or worthless accounting devices. Promised benefits are unsustainable and are creating massive unfunded liabilities. .

You won't hear any talk about benefit cuts or tax increases as part of a Social Security reform package. Instead, the terms of art are adjustments in such areas as the wage base on which payroll taxes are applied, indexing in such areas as the benefit computation, or both as in adjusting the normal retirement age to receive full benefits by indexing the current age to increases in life expectancy.

On the side of those who want to keep Social Security essentially as it is, we hear the Bush Administration's plan characterized as a scheme. In the United Kingdom, the home of the mother tongue, individual retirement accounts are commonly referred to as pension schemes. Here, however, the connotation is that mighty forces are scheming to take benefits away from future retirees. The funding of individual accounts is referred to as diverting payroll tax dollars. Transition costs are debt increases. The use of current Social Security reserves to reduce the reported size of the federal deficit becomes is a gimmick at best, raiding at worst.

Advocates of maintaining the current program focus not only on retirement but also on the broad range of risks, including disability and death that the program provides a safety net against. Any attempt to alter the program jeopardizes this broad protection and itself becomes risky. Investing in the stock market becomes gambling. Future financing challenges are at worst minor shortfalls that can easily be corrected later on.

The need to frame the debate using the right mix of words to scare or soothe, depending on the goal, should not come as a surprise. The genesis of the program itself illustrates this need. Social not only conveyed a sense of society's commitment to the elderly and the pooling of risks that is at the heart of the program, but it also co-opted those who were agitating for a more socialistic response to poverty in America. Security not only appealed to each individual’s need for a foundation of economic sustenance in old age, but also addressed the political need at that time to protect the economic system of the United States against growing threats and alternative ideologies. Indeed, part of the program's genius was in its very naming.

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