Decision Points

paying into the Social Security system for every beneficiary taking money out. By the time a young person starting work in the first decade of the twenty-first century retires, the ratio will be two to one.
    To compound the problem, Congress had set Social Security benefits to rise faster than inflation. Starting in 2018, Social Security was projected to take in less money than it paid out. The shortfall would increase every year, until the system hit bankruptcy in 2042. The year 2042 sounded a long way off, until I did the math. That was when my daughters, born in 1981, would be approaching retirement.
    For someone looking to take on big issues, it didn’t get much bigger than reforming Social Security. I decided there was no better time to launch the effort than when I was fresh off reelection.
    I started by setting three principles for reform. First, nothing would change for seniors or people near retirement. Second, I would seek to make Social Security solvent without raising payroll taxes, which had already expanded from about 2 percent to 12 percent. Third, younger workers should have the option of earning a better return by investing part of their Social Security taxes in a personal retirement account.
    Personal retirement accounts would be new to Social Security, but most Americans were familiar with the concept. Like 401(k) accounts, they could be invested in a safe mix of stock and bond funds, which would grow over time and benefit from the power of compound interest. The accounts would be managed by reputable financial institutions charging low fees, and there would be prohibitions against withdrawing the money before retirement. Even at a conservative rate of return of 3 percent, an account holder’s money would double every twenty-four years. By contrast, Social Security’s return of 1.2 percent would take sixtyyears to double. Unlike Social Security benefits, personal retirement accounts would be an asset owned by individual workers, not the government, and could be passed from one generation to the next.
    In early 2005, I sat down with Republican congressional leaders to talk through our legislative strategy. I told them modernizing Social Security would be my first priority. The reaction was lukewarm, at best.
    “Mr. President,” one leader said, “this is not a popular issue. Taking on Social Security will cost us seats.”
    “No,” I shot back, “failing to tackle this issue will cost us seats.”
    It was clear they were thinking about the two-year election cycle of Capitol Hill. I was thinking about the responsibility of a president to lead on issues affecting the long-term prospects of the country. I reminded them that I had campaigned on this issue twice, and the problem was only going to get worse. By solving it, we would do the country a great service. And ultimately, good policy makes for good politics.
    “If you lead, we’ll be behind you,” one House leader said, “but we’ll be way behind you.”

    The meeting with congressional Republicans showed what an uphill climb I had on Social Security. I decided to press ahead anyway. When I looked back on my presidency, I didn’t want to say I had dodged a big issue.
    “Social Security was a great moral success of the twentieth century, and we must honor its great purposes in this new century,” I said in my 2005 State of the Union address. “The system, however, on its current path, is headed toward bankruptcy. And so we must join together to strengthen and save Social Security.”

    With Mother campaigning for Social Secuirty reform.
White House/Paul Morse
    The next day, I embarked on a series of trips to raise awareness about Social Security’s problems and rally the American people to insist on change. I gave speeches, convened town halls, and even held an event with my favorite Social Security beneficiary, Mother. “I’m here because I’m worried about our seventeen grandchildren, and so is my husband,” she said. “They will get no Social Security.”
    One of my most memorable trips was to a Nissan auto-manufacturingplant in Canton, Mississippi. Many in the audience were African American workers. I asked how many had money invested in a 401(k). Almost every hand in the room shot up. I loved the idea of people who had not traditionally owned assets having a nest egg they could call their own. I also thought about how much more was possible. Social Security was especially unfair to African Americans. Because their life