What Happened in 2002

The 2002 debate about Social Security reform highlighted two things. First, the topic is highly emotional and offers fertile ground for scare tactics; and second, although polls continue to indicate strong support for the concept of personal retirement accounts, most Americans do not really understand the issue. Most workers do not understand Social Security's finances, why early action is necessary, or how the issue will affect today's younger workers. Even though the results of the 2002 election showed that fear-mongering by opponents of reform failed this year, unless workers receive full information about the current system's coming financial crisis and the potential benefits of reform, similar attacks could resurface in 2004. A better-informed public is essential if support for the concept of personal retirement accounts is to be translated into support for a specific plan.

What to Do in 2003

Educating the American public must be the major emphasis for Social Security reform in 2003. Although it is important that a plan for personal retirement accounts be well-designed and easily understood, even the best plan will not succeed unless sufficient resources are devoted to making the case for reform to the nation's voters. To make substantial progress on Social Security reform in 2003, some combination of the following options will be necessary.

• Use presidential leadership. Those in both parties who are opposed to reform or reluctant to discuss the issue have claimed that the White House has either abandoned its position or is only giving it lip service. The President must make it clear that Social Security reform is a priority of his Administration. This should include an early and lengthy discussion of the issue in the 2003 State of the Union speech followed by continued significant addresses to the public on the issue. The promotion of Social Security reform should be a constant theme rather than a one-time effort.
• Use the Social Security Administration's annual COLA letter to reassure seniors. Efforts to discredit reform in 2002 were aimed at convincing seniors that personal retirement accounts would put their benefits at risk. For reform to succeed, these fears must be laid to rest. While a formal guarantee of their benefits--similar to that proposed by Senator Rick Santorum (R-PA) and Representatives Jim DeMint (R-SC) and Walter Jones (R-NC)1--would be best, there are alternatives that would assuage workers' fears without requiring legislation. Perhaps the easiest of these options would be to use the SSA's annual letter to Social Security recipients regarding cost-of-living adjustments (COLAs) as a vehicle for information about reform. This letter, typically issued in October or November, could also assure workers that SSA has the resources to pay current retirees full benefits that were promised to them while alerting them that reform will be needed to pay full benefits to their children and grandchildren. This step could be taken by the Administration; but if the Administration is slow to act, it could also be required by Congress.
• Use SSA's Social Security Statement to educate workers. Every year, SSA sends all non-retired workers over the age of 25 a statement of what retirement benefits they can expect to receive and the amount of Social Security taxes they have paid to date. It also includes a cover letter from the SSA Commissioner. This annual report could be a vehicle by which to convey information directly to workers without going through the media or other secondary sources that could distort or modify the message. The package should also include a strong and direct message about Social Security's financial future, the real composition of the trust fund, and why reform is necessary. This move would serve as an excellent, cost-effective way to educate workers. Again, if the Administration is slow to act on its own, Congress should require this action.
• Create a special report to workers and retirees about Social Security's future. An additional way to communicate directly with both workers and retirees would be to send all those who currently receive benefits and those who receive annual Social Security Statements a one-time, straightforward, and understandable report explaining the program's coming financial crisis and why Social Security reform is necessary. This report would be mailed to the recipients' home addresses and could be issued by John Palmer and Tom Saving, the two Public Trustees of the SSA trust funds. Both trustees were appointed by President Clinton and confirmed by the Senate in 2000. As with the steps outlined above, Congress should take action if the Administration is slow to act.
• Congress should develop an understandable Social Security personal retirement accounts plan. The design of a plan for reform should begin with hearings on all aspects of the problems that confront today's Social Security system and on all possible solutions. Following those hearings, the proper committees in both houses of Congress should begin to write a specific plan for reform. While most reform plans, including those from the recent commission, have been well-researched and carefully considered, they have been difficult to understand and incorporate elements that have opened them to attack. Congress should work to develop a plan that is both politically sensitive and easy to comprehend.
• Use a positive message to build support. Many reformers tend to talk about the negative impact that the current system will have on future federal budgets and the shared sacrifice that will be necessary to pay benefits in the future. While this may be fine for experts, it does little to build support for reform among workers. Instead, the President and congressional leaders should use a positive message about the benefits of reform and should stress that personal retirement accounts provide an avenue to build wealth and create assets that could be transferred to a worker's family. They should also note that participation in personal retirement accounts would be optional and that workers could continue to remain in the current system if they so desired.
• Build bipartisan support. To be successful, a plan for Social Security reform will need substantial support from members of both parties. This may require both compromise and close consultation while the plan is being developed. Reform efforts will be doomed to failure if they are cast in partisan terms and perceived as an attempt by one party to destroy the current program.

David C. John is a Research Fellow at The Heritage Foundation.

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