Even so, Mr Bush's charge forward should be greeted with two big caveats. The first is that in his focus on Social Security he must not lose sight of the overall fiscal challenge—and the role his own policies have played in it. The long-term burden of Mr Bush's first-term tax cuts and spending increases is three times bigger than the looming Social Security shortfall. Pension reform is desirable; but it will not solve America's long-term fiscal problems, and if its political price is an out-of-control budget, that would be a serious mistake.

The second caveat is that Mr Bush must get the details of the reform right. Many are unresolved, but the basics are in place. He has ruled out raising payroll taxes or tampering with the benefits of anybody aged 55 or older—a political necessity. The plan's main idea is to let people divert up to a third of their payroll taxes into individual retirement accounts. In exchange, the account-holders would get smaller pensions from Social Security. The government would see its revenues fall in the short term, but its future liabilities would be lower as well.

Posted by: Jonathan Singer / 11:10 AM | Basie! Home