Clear Words on Social Security

Gene Sperling, who headed the Council of Economic Advisors under Bill Clinton, offers two clear-headed reasons to oppose proposals to carve out private accounts in Social Security in his column at Bloomberg News. His first reason is that SS is the only guaranteed retirement benefit we have:

In our three-legged retirement system -- which includes market-sensitive private savings, home equity and pensions -- Social Security is the only leg free of market and economic risk.

His second reason is that the social insurance value of SS is undervalued:

To see why, imagine a father who decides to invest $5,000 in the market and $5,000 in a combination of fire insurance, life insurance, and auto insurance. After one year, he happily notes that his market investment has risen 6 percent. Yet, because he neither died, saw his house burn down nor experienced a serious auto accident, he concludes he got a negative annual return on his $5,000 insurance investment and, therefore, cancels all of his insurance policies.
Of course, this father would be a fool. No rational person measures the value of insurance by an annual return. Yet, when Bush tells Americans to compare the return on their private account with the return they get with a Social Security system -- which provides valuable insurance against poverty, devastating disability, and the early death of a provider -- he encourages exactly that foolish comparison.

So why is Bush so intent on creating private accounts in SS? Sperling offers this explanation:

The White House's clear hope -- and progressives' fear -- is that this will be the first step to transforming a Social Security program that has been a unifying compact between all Americans into a private-account plan for the fortunate and a politically weak welfare program for the elderly and disabled.