George W. Bush deserves credit-a lot of it. This spring he dared to suggest a solution to the looming crisis in Social Security, the "third rail" of American politics that less responsible politicians have spent decades avoiding.
The much-reported problem facing Social Security has to do with demographics. The huge baby-boom generation is like a train, younger generations are like a damsel tied up on the tracks, and Social Security is the rope. As the boomers start retiring in about a decade, the burden on workers to support them will become crushing as the government must drastically raise FICA taxes.
Mr. Bush wants to ride to the rescue by harnessing the wealth-creating power of the stock market to solve this problem. Currently, a worker and his employer must pay 12.4 percent of the worker's income to the government in Social Security taxes. Mr. Bush would allow the worker to set aside two of those percentage points into a private investment plan. If that money earns even a moderate return, then the worker won't need to rely on taxpayers so much in retirement.
The idea has many virtues: It would give people more control over money that they have earned, which would bring Social Security more in line with the "You shall not steal" commandment. It would also lead more money into the private economy, where dollars usually are put to more efficient and moral use than are dollars in the government's hands. And it would allow more people of ordinary means to build wealth.
All of this makes Mr. Bush's reform crucial-probably this year's second most important campaign issue, after Supreme Court appointments.
But his proposal is not enough. For both an economic and a moral reason, raising the retirement age is even more important than Mr. Bush's salutary reform.
The economic reason has to do with the baby boomers and the way they change society as they go through life's stages. Since they are so numerous, the effects of anything they do en masse are dramatic. The boomers went through youthful rebellion together
in the 1960s and 1970s, and so America went through, well, the 1960s and 1970s. Today the boomers are at the age when people are most productive and are able to earn and invest more than at any other time in life. And guess what: America has a soaring economy and a bull market of historic proportions.
What happens to the economy when all of those boomers stop being so productive and start selling stocks to pay for lives of leisure? The result isn't too hard to predict: a souring economy and a bear market of historic proportions.
It's entirely possible that I'm wrong about this. The U.S. economy and the Dow have proved to be wonderfully resilient in the past. Maybe they can withstand 70 million boomers becoming idle and living off the state and their own accumulated assets. But then again, maybe not. Mr. Bush's reform depends on a healthy economy and a strong stock market, and the retirement of the boomers may undercut both. If so, then raising the retirement age is the key to Mr. Bush's reform becoming an economic success.
But raising the retirement age is a moral imperative as well. Only a few generations ago, retirement was extremely rare. Our ancestors believed that able-bodied people should work, and not just for money but because of the goodness of work itself. Today, people try to avoid work if they possibly can, and the federal government-ever sensitive to the desires of the people-obliges in helping them.
One likely reason for this change in attitude is that people don't take God's Word as seriously as they once did. According to the Bible, God gives people skills so they can serve Him and others as well as earn a living for themselves, and there's no indication that this calling ceases in old age. The Bible also teaches that productive labor is an integral part of a fulfilling, satisfying life (Ecclesiastes 5:18-19).
This doesn't mean that homemakers and volunteer workers should find paid jobs. Very important productive work (like raising children) occurs outside of the paid economy. But a lot of other people are called to paid labor. How much poorer is society-and not just in material terms-because the government bribes talented teachers, managers, and other laborers to stop using their God-given skills while they still have something to contribute?
So Mr. Bush, thanks for proposing a much-needed reform of Social Security. But it's no economic or moral substitute for biting the bullet and raising the retirement age.