With the Social Security debate heating up, U.S. lawmakers ought to look at what happened when Britain privatized its senior social insurance program 20 years ago during the Thatcher era. An article from the February issue of The American Prospect shows it's been "A Bloody Mess." Author Norma Cohen writes:
For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus -- even among British conservatives -- that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension -- one similar in design, in other words, to America’s Social Security program.
You can read the whole article here.
Social Security reform also was the topic on NPRs Talk of the Nation yesterday, a show dominated by Stephen Moore's shameless shilling for a wildly complicated and unfair plan he knows full well will bankrupt the system - which is, of course, exactly what the conservative extreme hopes will happen. "Ownership society," my ass. But for all Moore's misinformation, Dean Baker, co-director of the Center for Economic and Policy Research, did a good job explaining the simplicity and fairness of the current program.
Does Social Security need to be fixed? Undoubtedly - by wiser government (not personal) investment of any surplus funds, by further encouraging (though not mandating) later retirement in trade for higher benefits, and by raising the cap on wages taxed under the program to reflect current income levels. Let's encourage Congress to consider these reforms rather than the radical upheaval Bush is preparing to put forward.