When it comes to pensions, President Bush's administration seems to practice a strange double standard: Private pensions are assumed to be superior to the current system simply because they are, well, private. And so the president has stuck adamantly to the line that the solution to Social Security's perceived problems is privatization. But in reality, Social Security is far from crisis. And the private-pension system is in serious trouble.

When the government reports the numbers for Social Security in great detail every year, it uses consistently conservative methods; we can be as confident in these numbers as in any long-run forecast. The board of trustees charged with overseeing the system reports that benefits can be paid in full for 40 more years -- and, after that, more than 70 percent of promised benefits can be paid.

By contrast, the numbers for private pension funding are not consistent, year to year or company to company. Unlike Social Security, companies have wide latitude in choosing their accounting assumptions for their annual reports. Most private pension funds assume high rates of return on their assets to be able to pay future benefits. We know that most private pension funds actually lost value during the current stock-market decline. Yet despite low interest rates and three years of poor stock-market returns, companies have been pushing for legislation that would raise the future growth rate used by regulatory authorities in assessing the firms' pension-funding adequacy. This change in assumptions would allow companies to decrease their pension-funding obligations, freeing up revenues to distribute as profits. If a consistent set of standards were used, as they are for Social Security, private pensions would be considered to be in their worst condition in decades. But instead of fixing their pension funding, most companies are pushing for an accounting whitewash.

During the past few years, private pension funds have managed to get the interest rate used to assess their adequacy raised. This is important because the faster the funds' assets are assumed to grow (the higher the interest rate), the less companies need to add to their pension-fund assets today. Under the old rules, the assumed rate of return today would be about 5.8 percent. That has been relaxed; the new rate is 6.7 percent. Now companies are pushing for legislation that would increase the yield in these calculations to 7.4 percent -- junk bond territory. Because every percent increase in the projected yield reduces funding required by 10 percent to 15 percent, these accounting shenanigans stand to reduce the private pension funding obligation by about 20 percent.

If the Social Security system could similarly fiddle with its future obligations by changing its assumptions, the problems projected for 40 years from now would be greatly diminished. The actuaries of the Social Security system report that if the interest rate they used were about 5.7 percent rather than about 5 percent, as is currently used, the shortfall over the next 75 years would be nearly 30 percent smaller.

So where do we really stand in our forecasts of future pension security? Both the Social Security system and many private systems are underfunded in the sense that they are likely to have insufficient funds to meet all commitments. With some big companies such as General Motors, the shortfalls are big and the problems could begin relatively soon. With Social Security, the problems are not expected to become acute for 40 years.

For any pension obligation, the careful way to cover a projected shortfall is to set aside more today, investing it in a safe portfolio of assets. Instead, our government would like to shed its Social Security obligations, shifting all the risk on future returns to families and private pension funds. And when private pensions have run into trouble, the government has played along with accounting chicanery. This is no way to run a transparent government, and it is no way to guarantee Americans a secure retirement.

Bernard Wasow is an economist and a senior fellow at the Century Foundation.

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