Twelve years ago the Report of the President’s Commission to Strengthen Social Security was issued. In that report, a bipartisan Commission recommended a massive reform of Social Security that would have given each working American the option to have a pre-funded personal account. The Commission’s recommendations, if timely implemented, would have eliminated the daunting challenges we face today, permanently strengthened our economy, and significantly reduced the concentration of wealth in America. The report concluded with the following statement:
The current system is financially unsustainable. Without reform, the promise of Social Security to future retirees cannot be met without eventual resort to benefit cuts, tax increases, or massive borrowing. The time to act is now.
That was twelve years ago. The Commission was right.
Eleven years ago, on June 18, 2001, Treasury Secretary Paul O’Neill made the following opening statement to a group of financial executives at the World Trade Center:
I come to you as the managing trustee of Social Security. Today, we have no assets in the trust fund.” [If we had had run pension funds the way the government has run Social Security] “we’d all be in jail. We would not be permitted to have pension-fund obligations without assets behind them.
O’Neill was right.
As Treasury Secretary, O’Neill pushed President Bush to act on the Commission’s report during his first term and fix Social Security for the future. Fearful of an adverse impact on his reelection bid, Bush rejected O’Neill’s pleas and eventually rejected O’Neill as his Treasury Secretary. The book The Price of Loyalty (page 281) described the situation, through O’Neill’s eyes, as follows:
The baby boomers were coming fast… The shortfall was $44 trillion over the life of the program, far more than previous estimates. Recommendations of the Social Security Commission were all but tabled by Bush. It was a bomb locked in a drawer.
The bomb is still locked in the drawer. Nothing has been done. Bush made an attempt after he was reelected in 2004, but his plan was weak and his pitch was weaker. His political capital had been spent on the war, and the Democrats had lost all interest in playing ball on something as important as Social Security. They saw an opportunity to gain control of Congress in 2006 (which they did). All they had to do was keep Bush on his back.
When Bush rejected O’Neill’s pleas during his first term and wimped out on the Commission’s recommendations, I was disappointed. In fact, I was downright mad. I had been watching this mess build for nearly 13 years. This was the time and the opportunity to fix the future, and Bush, plain and simple, chickened out. So I decided to write a short book to describe the history and the risks of the crisis. The title of this 2003 book is “Gutless Neglect: America’s Biggest Money Crisis.” I made the following prediction in the book:
If we continue to keep our heads in the sand and procrastinate, the huge crisis will hit our kids just about the time that many of us boomers are ready to retire. Our kids will wake up to the crisis and see that they have been set up. They will then discover that their kids, our grandkids, face an even worse plight. They’ll get mad and rightfully conclude that they’ve been cheated and robbed. Then they’ll demand relief. The perpetual conflict will force never-ending compromises that will distribute and allocate serious pain among all the participants. The old will feel forever disillusioned and insecure; the young will feel forever cheated.
I was right. The first baby boomer turned 65 in 2011. We’re in a world of hurt, and the tension grows every day. The bomb remains locked in the drawer. Like Bush during his first term, most are leaders are just too scared to advocate any action that would expose and defuse the bomb.
When I wrote this short book in 2003, I asked Lynn Brewer to write the foreword to the book. Ms. Brewer is the brave former Enron executive who notified U.S. government officials of Enron’s wrongdoing and ignited a series of events that ultimately toppled the mammoth Enron and its executives and destroyed one of the world’s largest accounting firms, Arthur Anderson. She is the author of House of Cards: Confessions of an Enron Executive. Following is an excerpt from the foreword that she wrote to my 2003 book. Keep Ms. Brewer’s words in mind as you evaluate and analyze the plans that our political leaders (both existing and hopeful) are now rolling out. Ask yourself: how can any plan honestly offer us any real hope for the future by keeping the massive senior entitlement bomb locked in a drawer?
I know crisis. I’ve watched leaders so preoccupied with short-term appearances and the security of their current power base that they lose all capacity to distinguish what is right, from what they believe may be justifiable. I’ve experienced the inertia of a large institution hurling itself into destruction as the fight to make right dies with determined avoidance of any conflict or murmur of transgression.
I know lies. I’ve witnessed the posturing and manipulation of numbers, reports and financial records to defensibly mislead uninformed masses. I’ve observed first-hand how the need for money and capital can force subordination of intellectual honesty to practical pressures of delivering on expectations of empty promises. I’ve worked alongside good intentioned people who lose all capacity to acknowledge past blunders and wrongdoings for fear of what they know is inevitable.
I know these things. In fact, I have lived them. It was my abhorrence of these realities that prompted me to do what I did at Enron… Regrettably, our republic appears to suffer from the same plight.
This book exposes what is appropriately titled America’s biggest money crisis. In simple, straight talk it describes the reality of our nation’s single largest budget crunch: unfunded mounting retirement benefits. More aptly, it illustrates the inequities of the current system and how accounting gimmicks have been used for decades to create an illusion of funding while hundreds of billions of dollars have been used to cover other deficits…
Whether you agree with the proposed fix discussed herein or some derivative thereof, the reality that as citizens we need to constructively rally for change is undeniable. We need to rattle our leaders to wake their consciousness from decades of plausible deniability and business as usual. They need to know that we demand change while positive options still exist.
What is most important is that you accept the responsibility to be well informed, as it is your future. You need to develop your own opinions that will serve your future. You need to demand that your leaders respond to urgency, ending the gutless neglect of America’s biggest money crisis before it is too late, because no one will care about your future if you don’t.