The Social Security crisis is real

Democrats like Krugman smell a political opportunity and are going to enormous lengths to claim that there is no problem and pursue the politically attractive option of burying their heads in the sand.  An option that will, by law, result in enormous benefit cuts that will hit the same workers they claim to care about.

There is another option.  We must begin investing Social Security dollars in real assets that will earn a real rate of return, instead of paying them out to current retirees and allowing Congress to waste any surplus on unrelated federal programs.  Back in 2005, the chief actuary of Social Security found that at least four separate proposals could achieve full solvency by harnessing the power of higher investment returns, without tax increases of benefit cuts.

There are two ways to do it—allow government to centrally invest Social Security dollars, like a pension, or allow workers to make their own investment decisions via personal accounts.  Democrats are wrong to claim that personal accounts would hand Social Security over to Wall Street because – unlike the central investment option, while Bill Clinton favored – individuals would make their own decisions along with their choice of financial advisers.

The idea would be to take control of retirement away from politicians in Washington and from politically connected Wall Street insiders and put it in the hands of workers themselves.  Even the most risk-averse could choose to invest in government bonds and earn a higher return that Social Security currently promises.

One key question is how to pay for benefits of current retirees if the taxes from current workers aren’t shipped immediately out the door.  That is a real problem, which already exists because the same dollars can’t be spent twice, and the money we’re spending on benefits now won’t be there when current workers retire.  The best solution is to cut other, unrelated wasteful spending to shore up benefits while transitioning younger workers into a sustainable, reformed system.  We can start by repealing the hundreds of billions of dollars of unspent stimulus.

Whether you agree with my preferred reform or not, the simple fact is that Social Security is already in deficit and can’t afford to keep its promises.  That means the status quo is not an option.

Mr. Kerpen is vice president for policy at Americans for Prosperity.