CHUMP CHANGE:

Easily Financed (Steve Forbes, 03.14.05, Forbes)

Critics of President Bush's plan for reforming Social Security--the President would allow working people, if they so choose, to put up to 4 of the 12.4 percentage points of their gross wages that are withheld as the Social Security payroll tax into their own personal retirement accounts--claim that we can't afford the $2 trillion or so of needed borrowing in coming years to finance the transition. They're wrong. We could easily finance such a transition.

During World War II, after all, we borrowed in less than four years what would today be the equivalent of $10 trillion, and we did so at interest rates of less than 3%.

The U.S. has $80 trillion in assets. Factor out our debts and the nation as a whole still has a net worth in excess of $50 trillion, which could double over the next decade. Those numbers don't even take into account all the portfolio assets that are held in other countries. Under the circumstances, borrowing an extra $100 billion to $200 billion a year is, in the vernacular, no sweat.

The markets would quite easily, quite willingly buy bonds that would transform our unsteady, increasingly troubled pay-as-you-go system into one that would become a generator of capital of historic proportions, capital that would give us a far more muscular economy in the years ahead.

If anything, the Administration should be criticized for taking such a cramped view of Social Security reform: Workers should be allowed to put 6 to 8 percentage points or more into private accounts. The cap of $1,000 a year (and rising $100 a year thereafter) on those contributions is ridiculously small.

One step at a time, Mr. Forbes. Of course, if you'd step up and run for the Senate from NJ you could propose that...

Posted by Orrin Judd at March 7, 2005 6:02 PM