Forecasting 'personal security'

If a meteorologist said it would snow Feb. 17, 2052, would you put on your winter jacket today just in case?\nWhen it comes to long-range forecasting, neither meteorology nor economics is an exact science. When President Bush proclaimed during his Feb. 2 State of the Union address Social Security will be bankrupt by 2052, according to a recent Congressional Budget Office report, it raised the eyebrows of a local economist specializing in economic forecasting.\nBill Witte, economics professor and co-director of the Center for Econometric Model Research at IU, has a different interpretation of the data. Econometrics is the use of statistical techniques to analyze economic data.\n"The Bush administration's plan to privatize Social Security shifts responsibilities away from society and raises deep philosophical questions as well as economic concerns," Witte said.\nSocial Security will not be depleted until after 2052 if current surpluses are saved, which came to more than $100 billion for the last fiscal year, Witte said. This date of "crisis" has already been moved back several times in the wake of a better-than-forecasted economy and increased tax revenues.\n"As a forecaster by trade, I know that when you try to look out 10 to 15, to say nothing of 50 years in the future, the results don't have a lot of validity," Witte said. "There are simply too many variables to be accounted for."\nSenior and IU College Republicans political director David White is in favor of Social Security reform.\n"I support his initiative," White said. "It's a good thing to address the problem before the money runs out."\nAs the system currently stands, 12.4 percent of earnings up to $90,000 are taxed for Social Security, of which the employer and employee each pay half. Although vague on specifics, the Bush administration plans to take between two and four percent of the employee's contribution to Social Security and give that money to the employee to put in a private retirement account. Witte claims to make up for the lost funds, the government would need to borrow between $2 and $4 trillion.\n"If anything, private accounts will drain more money out of the system and will cause it to run out of money that much sooner," Witte said. "Due to the necessary borrowing, an equal if not greater amount of money is taken out of the market as is put into it by the new private accounts."\nWhite visualizes privatization as putting more power in the hands of American citizens to control their retirement.\n"It's important that Americans don't depend on Social Security for their retirement now or the government will subsidize your living after retirement," White said.\nThe majority of students at IU already or soon will have a 401k and other long-term savings plans. The decisions Americans make regarding the Social Security system today will have a lasting impact on when and how easy it is to retire.\n"One way or another, the college generation of today will be the ones providing support for the baby boom generation and the one after that," Witte said. "The decisions made in the coming year about Social Security will have a great impact on how easy or hard it will be to do that." \nSenior Chris Ryan said he realizes how his actions today can affect him later.\n"Even though most college students don't think about long-term goals or effects, this debate about Social Security still changes the rest of all of our lives," Ryan said. "I accept the need for reform (of Social Security) but don't think that what the President proposes is the right course of action ... why change a system that has worked so well for three quarters of a century?"\nSince the State of the Union address, President Bush has traveled nationwide to shore up support for his reform agenda that has thus far met a lukewarm reception. About 40 percent of those surveyed are in favor of the 'personal' accounts proposal ('personal' is being used instead of 'private' by the administration because it polls better) while 44 percent think the system should be left how it is, according to a recent Newsweek poll. Younger workers are more favorable to the president's plan than older citizens on average.\n"There are problems with the Social Security system today but they are long-term and manageable," Witte said. "Through a combination of cutting benefits, raising taxes or raising the income ceiling of $90,000, this problem will be solved."\nThe answer to this debate will hinge on whether Americans are comfortable with a New Deal-era socially supported retirement system, or if the majority feels retirement should be more of an individualized concern. Although an important topic for debate, basing the need for immediate reform on economic forecasting seems tenuous, Witte said.\n-- Contact Staff Writer Scott Shackleford at sjshacke@indiana.edu.\n-- Additional reporting by Business Editor Lori Snow. Contact her at losnow@indiana.edu.