What if it’s all another rope-a-dope?

Yesterday’s NY Times posed this query on Social Security: “Q. Social Security is supposed to be the "third rail" of politics, fatal to those who tamper with it. What has changed?” George Will followed up today by writing “Democracies generally do difficult things only under the lash of necessity.” Yet President Bush seems committed to grabbing the third rail and staging a debate on the future of Social Security.

But what if the prospect of personal savings accounts is all just a punching bag where the Democrats will flail away as the Administration lays out a broad argument for modernizing Social Security for the 21st century?

For example, when Social Security was formed, the age at which benefits could be collected was pegged at 65; the average life expectancy for Americans born in 1930 was 60 years. According the World Almanac, life expectancy is now at 77 years and retirees who start collecting benefits at 65 can expect to live another 18 years. Second, the calculation used to determine benefits are based on wage indexing which has traditionally outpaced inflation. As Arnold Kling writes today on Tech Central Station, fixing current benefits to inflation would preserve the current promise of while tamping down spiraling entitlement payments (an idea already distorted and demagogued by the Democrats as a “benefit cut.”)

It seems to be that, while the goal of personal ownership is laudable, the private savings accounts are fraught with problems. Liberals, of course, oppose personal accounts because it takes resources away from government which is anathema to them. So the rhetoric on the left will focus on the evil stock market and the Wall Street fat cats who will benefit, even if their clients will see a better return than they would under Social Security. But fiscal conservatives like me (who hated the prescription drug benefit) should be troubled by yet another trillion piled on top of the national debt. If Republicans are ambivalent and Democrats are dead-set against personal accounts, they have little chance of passing through Congress.

Say the Bush Administration proposed personal savings accounts as the centerpiece of Social Security reform and Democrats scramble for garlic and crosses more garlic:

"Their strategy is, we're going to scare people, cut benefits, privatize and call it a reform agenda," said Representative Rahm Emanuel, Democrat of Illinois.

Then Bush springs the trap:

But Mr. Bush's strategy puts Democrats in a difficult position. If they argue that Social Security is fundamentally in good health, Republicans could accuse them of irresponsibly glossing over serious long-term problems.

Suppose President Bush retorts “OK, no privatization. But we’re absolutely not going to raise the regressive payroll tax yet again. Instead, let’s hold benefits constant by indexing to inflation and slowly raise the age for full benefits.” Those reasonable, 21st century changes may not “save” Social Security but the vanishing point of insolvency may be extended out decades.

More and more and more younger Americans believe Social Security is broken and they are paying into a system which will return only a small fraction of their sacrifice. Even if President Bush’s reform proposal goes down to defeat, it will be a Pyrrhic victory for the Democrats who will have to explain in 2018 why they didn’t do something when they had the chance.