It’s rather curious that the Social Security debate has come this far without President Bush pointing out that employees of three Texas counties replaced Social Security with personal retirement accounts nearly 25 years ago.
In 1981, Galveston County’s 2,000 workers voted to ditch Social Security and entrust their retirement futures to the market through a private plan. Matagorda and Brazoria counties, also on Texas’ Gulf Coast, followed Galveston County’s lead and dumped the Depression-era program.These county retirement programs are the best-kept secret in the debate over the future of Social Security.
Most of those who hold private accounts instead of being chained to the New Deal program — about 5,000 Texas county workers — reap a return of two to four times what they would get from Social Security. And the program is stable.
All opponents could counter with are studies that say low-income workers do better staying with Social Security. What they won’t say is that for workers to do better in Social Security, they would have had to earn less than $17,100 a year in 1999.It’s a ruse. Few Americans make just $17,100 a year (or the inflation-adjusted equivalent) every year of their working lives.
Some might earn that for a few years, but as people go deeper into their careers, their incomes tend to grow with promotions and job changes. The exceptions would be the profoundly disabled, the chronically homeless, and those who have chosen to live outside the mainstream of working America. Of course, virtually all serious reform proposals would create a national floor anyway, so that the very poor would not lose out.
Opponents of personal accounts want to say they can’t work, that people will day trade, invest poorly or lose money. The Galveston experience proves they’re wrong.
True, the Galveston plan is structured differently than many of the current reform proposals — something we call the “Banking Model” rather than the “IRA Model.” But that simply means the discussion should be about how to structure the accounts, not whether they can really work.
They can, and they have been for 25 years.