by Rod D. Martin
August 19, 2005

To hear today’s Democrats talk, Franklin Roosevelt would be spinning in his grave if he heard today’s debate about Social Security private accounts.

They’re only half right. He’d be spinning if he heard today’s Democrats.

Roosevelt was many things, but he was no fool, not on this point. The man who gave us the New Deal understood perfectly the limitations of Social Security. In honest moments, politicians correctly note that “Social Security was never meant to pay for 100% of your retirement.” And to pay for the part a government pension scheme couldn’t, FDR had a very modern-sounding idea.

Announcing his plan on January 17, 1935, Social Security’s founder said: “in the important field of security for old people, it seems necessary to adopt … voluntary contribution annuities by which individual initiative can increase the annual amounts received in old age.”

In other words, private accounts.

Seventy years later, Roosevelt’s words ring truer than ever. Social Security taxes — just 1% back then — now consume between 12 and 15% of most Americans’ income. They effectively eliminate any possibility of separate retirement savings without serious sacrifice.

And for what? Social Security checks remain a pittance, certainly nothing anyone should have to depend on as a monthly income; and with a $255 death benefit, they don’t even pay enough to bury you.

Worst of all, you don’t own your own money. You can’t pass it on to your wife, you can’t pass it on to your kids. And since government spends every dollar as soon as it comes in — the trust fund is a myth — there’s not even any guarantee you’ll get to keep your money yourself.

But as President Roosevelt taught us, there really is a better way.

Under President Bush’s plan, Social Security could finally fulfill its promise. Private account-holders could look forward to between three and five times the monthly check available under the current system. Most Americans would retire on a higher monthly income than they had when they were working.

And they wouldn’t have to invest in anything risky to achieve this, or give up the safety net of government Social Security, or even obtain any specialized knowledge of investing. The tens of millions in (incredibly successful) private accounts around the world — from Chile to Britain to Australia to the public employees in Galveston, Texas — have already shown us the way.

Some pundits have pronounced the President’s plan dead; but the rumors of its death are greatly exaggerated. Social Security reform can still happen, and happen this fall once Congress returns.

The best bill before Congress — by a wide margin — is Ryan-Sununu. It proposes placing half of your Social Security tax money in an account which you alone control: you will own it just like your IRA or 401(k). This would not only give every American a much higher retirement income than any other bill before Congress, it would also solve the problem of Social Security’s impending bankruptcy: as more Americans use their private accounts instead of burdening the current system, the Ryan-Sununu plan would create an ongoing multi-trillion dollar surplus roughly twenty years out.

This would completely eliminate the solvency crisis. More than that, it would give the current generation of retirees a huge benefit increase, and everyone else an enormous tax cut.

President Roosevelt understood: Americans need the right to contribute their hard-earned money to their own voluntary personal retirement accounts. These PRAs will let every American — even our very poorest — accumulate real assets, real nest eggs for retirement, and real inheritances for their children.

No one will benefit from this more than the lower and middle income working-class, who can never quite get out of poverty because the current system taxes away too much for them to save. No one, that is, except black Americans, whose lower life expectancy means they frequently die before ever receiving Social Security at all, and aren’t allowed to pass anything on.

IRAs and 401(k)s have sparked an enormous capitalist revolution, transforming millions of regular Americans from ordinary workers into investors. It’s time to complete that revolution. Let’s help every American participate in this very American dream. It’s time the poorest among us had the same benefits from our free market system that most of us take for granted.

It’s the least we can do, for their sake, and for President Roosevelt’s vision.