Federal Reserve Chairman Alan Greenspan's comments last week offered a grim prediction for the future of Social Security. In his comments to Congress, Greenspan warned "we are overcommitted" and the government must therefore cut benefits to avoid further damaging to the economy. Brought about by a confluence of factors including mounting deficits, a large, aging population and a smaller incoming work force, the program that was once called a "political third rail" -- untouchable -- is suddenly debatable.
Even before this report, though, President Bush hads been arguing for a different plan to solve the problems of the Social Security system. Apparently, when he said during the 2000 campaign that "they want the federal government controlling Social Security like it's some kind of federal program," what he really meant was he wanted to privatize it. Under his plan, there would be an option to convert one's guaranteed income into an investment in, for example, the stock market. But right now the government estimates that about 20 percent of the elderly rely on Social Security for all their income. So with the increased risk of losing these benefits in a bad private investment, is it prudent to shift this responsibility onto the people it is supposed to secure?
And what will happen when someone does invest poorly? Who will pay to support this person in retirement? The answer, of course, is the state. So perhaps instead of talking about diminishing Uncle Sam's role, what we ought to be discussing is a radical expansion instead.
Indeed some have already started talking about it. On a separate, but equally important issue, Johns Hopkins University President William Brody has claimed that the government will, in the near future, be forced to offer universal health insurance because premium costs will become prohibitive. According to his reasoning, with new medical advances that will allow doctors to accurately predict who will get which disease, it will be impossible for the average person to get coverage.
Yet, even if we create a system of universal health care and maintain government's control of Social Security, that doesn't necessarily mean we are fated to emulate so many of our allies and embrace the welfare state. To do so would require a fundamental overhaul of how we run our society and economy.
For most countries in Europe that are considerably more homogenous and much smaller, their welfare systems arose from a post-war mentality after the fall of Nazism. Supported by a deeper commitment to the national community as a whole, made possible as a product of their size, these countries invest a great deal to ensure the security of all citizens. In Denmark, for example, a country of just over five million people provides, among other benefits, universal health care coverage, free education, a generous unemployment salary and guaranteed pensions in retirement.
But this does come at a cost. While those in the upper-most federal income tax brackets in the U.S. may look to pay around 40 percent, in Denmark these people's rates can reach over 65 percent. And while many often complain, as one Dane lamented "it is impossible to get rich here," I met no one there who was willing to forgo their guaranteed benefits. After all, they are getting more than just their money's worth. They are paying for a peace of mind that comes from knowing that no one in society will be marginalized enough to commit crimes; they have created a system that ensures no one will become socially or economically isolated.
But even as rosy as this picture appears, it doesn't seem possible in America. Even now, when the disparity between the rich and poor is so great that Sen. John Edwards ran a highly effective campaign on almost this issue alone. There are few at the top end of the spectrum that would be willing to invest in such a social engineering venture. To do so seems un-American and contrary to the capitalist dream. This is especially true considering that so many of their benefits are available here, in a slightly less universal or generous way, but at a substantially lower cost.
We are left, then, in a situation where the current system will soon prove outmoded, but a complete overhaul would be too radical. What we should realize instead is that partial reform can provide a solution to many of the social problems we are now facing. Not only do most benefits already exist here in some form, but the establishment of others like universal health care will become as necessary to ensuring the rights of our citizens as securing our safety is. After all, incurring the costs of some programs once is better than betting that we won't have to pay for them again later.
David Leiman's column appears every two weeks.
