- The Washington Times - Thursday, May 18, 2000

When President Clinton delivered his 1999 State of the Union address, Vice President Al Gore was there to applaud the president's proposal to "reform" Social Security. Under Mr. Clinton's plan, over the next 15 years the federal government would invest $700 billion in Social Security payroll tax revenue in the stock market, making the United States government the largest single shareholder in the economy.

Precipitating the Clinton-Gore administration's proposal was the simple fact that the stock market has consistently generated much higher returns over the long run, averaging 7 percent annually after inflation. By contrast, the return from the Social Security program for families with earners born after 1976 is less than 2.5 percent. Indeed, within less than 40 years, the current system will be able to pay only 75 percent of the promised benefits. The 1999 Clinton-Gore proposal went nowhere not because it was foolish to attempt to capture higher returns offered by the stock market, but because it would have given the U.S. government undue influence over the stock market through the investment of very large sums of money. Rather, the U.S. Senate, in a 99-0 resolution, deep-sixed the plan because of its socialist foundation.

Now comes Texas Gov. George W. Bush, the presumptive Republican presidential nominee, with a much better plan to shore up Social Security. Also designed to capture higher returns, the proposal Mr. Bush offered Monday would allow individuals, as opposed to the government, to invest a portion of their Social Security payroll taxes in the stock and bond markets. Mr. Bush recognizes that the only way to preserve the long-term viability of Social Security is to increase the ludicrously low rates of return projected under the current system. Moreover, his plan excludes the intrusion in business decisions under a system in which the government directly controlled so many business assets.

Mr. Bush specified few details although he did rule out any increase in payroll taxes, announced that no current or imminent retirees would be affected and pledged to dedicate all of Social Security's near-term surpluses to resolving its long-term problems. Addressing both the retirement of the baby boomer generation and beyond, Mr. Bush proposed to form a bipartisan commission after his election to prepare a detailed plan to implement the partial privatization of Social Security. Most bipartisan proposals circulating in Congress today envision earmarking 2 percentage points of the 12.4 percent Social Security payroll tax for private investment accounts.

Predictably, Mr. Gore responded in demagogic fashion. Referring to Social Security as "a solemn compact between the generations," Mr. Gore neglected to mention that this "solemn contract" has produced an estimated unfunded liability over the next 75 years of nearly $20 trillion. Recently, in a demonstrable falsehood, he has even denied that the $700 billion he and the president foolishly proposed to have the federal government invest in the stock market would have come from Social Security payroll taxes.

For eight years, the Clinton-Gore administration has squandered the opportunity to address the unsustainable burden of Social Security's "solemn compact." Instead, Messrs. Gore and Clinton have politicized the problem for their party's electoral benefit. As a breath of fresh air, Mr. Bush declared, "The days of spreading fear and panic are over. The days of delaying, dividing, demagoguing are over. When I am elected, this generation and this president will solve Social Security." That is what leadership is all about.

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