Need to save Social Security, economy, America

By John Cunniff The Associated Press
Thursday August 23, 2001

NEW YORK — The big issue in Social Security reform isn’t limited to just strengthening the system. It’s bigger than that. As big, perhaps, as saving the entire economy. 

This latter goal is sometimes lost amid the hot political debate of what needs to be done to keep the system alive beyond 2016. But it is there, and it involves every aspect of the economy and society. 

That larger goal is to get Americans to save, not just for retirement but in order to participate more meaningfully in the economy. To give them a greater share in economic growth. 

In fact, to save the economy. 

Without savings, the economy’s ability to grow and innovate eventually erodes, meaning fewer new companies, outdated older companies, fewer jobs, fewer opportunities.  

Savings finance such things. Not just retirement. 

In short, without saving, the economic pie shrinks rather than grows. When it grows, it means everyone has a bigger part of the pie without lessening their neighbor’s slice. 

But households, even those who used to save, aren’t doing much saving today.  

Blame it on the lack incentives. Blame it on the feeling that the government will take care of them. Blame it on a dozen different reasons. 

The interim (August) report of the President’s Commission to Strengthen Social Security points out that in 1998 the median household owned only $17,400 worth of financial assets, including retirement funds.  

Four of every nine American households saved nothing in 1998; six of 10 African American and Hispanic households saved nothing that year. In effect, they did little to invest in their own and the economy’s future. 

They did, of course, save through Social Security, but that is a type of forced saving that can’t be avoided.  

It is, in the eyes of many, a tax, not an investment. It provides no legal ownership. No incentive to invest. 

Were contributors allowed a portion of Social Security payments for investment in securities, the tax would seem less a tax and more an opportunity to participate in the economy. And an education too. 

It might have social benefits as well, since partial privatization could be an incentive and education for many lower-income and minority families to participate for the first time in financial markets. 

For the first time, it states, “the retirement program can become an active rather than a passive instrument of personal financial security,” providing families with resources  

they never before had or  

maybe imagined. 

It would do even more, “widening the circle of Americans fortunate enough to pass on the accumulated results of their investments and hard work.” 

And, of course, in the process of saving and investing it might also help provide the wherewithal, now in short supply, for the for the economy to expand, productivity to rise, and living standards to become elevated. 


John Cunniff is a business analyst for The Associated Press