- The Washington Times - Thursday, June 14, 2001

A bipartisan presidential commission began working this week on an ambitious and politically explosive plan that would let workers put part of their Social Security payroll taxes into their own private stock-and-bond retirement accounts.
If you thought the legislative combat over President Bushs tax-cut plan was rough, changing the governments largest, costliest and most popular social program will make that experience look like a Sunday-school picnic.
The 16-member commission, appointed by Mr. Bush, is charged with coming up with a way to permit workers to voluntarily set aside a small portion of their payroll taxes for deposit into their own investment plans not unlike the way thrift savings, IRAs and 401(k) plans work.
Just the fact that a government commission is charged with partially privatizing what has been the Holy Grail of American politics is historic. It is another example of how far the center of political gravity has swung to the right in this country on economic policy, and a measure of how conservative Mr. Bushs agenda really is. If he succeeds, no other reform that he will make in his presidency will be as far-reaching as this one.
The need to reform the Social Security is clear and inescapable. It faces bankruptcy. Millions of Baby Boomers will be retiring in the middle of the next decade, and there wont be enough workers paying taxes into the system to pay for all of their benefits. The system will begin showing a deficit in 16 years.
One of the first decisions that the commission made when it held its first meeting on Monday was to put together an interim report to the country, explaining the problems that beset Social Security and the reasons why major reforms are necessary as soon as possible. That report will come out in July. The commissions final set of proposals will be presented to the president and to Congress this fall.
The commission is co-chaired by former Sen. Daniel Patrick Moynihan of New York, a Democrat who has long favored creating personal investment accounts to save the system; and by Richard Parsons, chief operating officer of AOL/Time Warner, who says he has an open mind about reform.
The other 14 commission members are largely supportive of Mr. Bushs idea. They were not chosen to rethink how to solve the Social Security conundrum, but to come up with a financially workable plan to implement Mr. Bushs proposal to gradually shift retirees into private investment accounts that will create greater wealth for them, their families and the economy.
Notable among the panel members is Robert Johnson, chairman and CEO of Black Entertainment Television. Mr. Johnson thinks investment accounts would "bring African-Americans into the mainstream of this society." Mr. Johnson is focused on the most important failure of the current Social Security system: Many black Americans receive the poorest rates of return from the program because they have comparatively lower incomes and shorter life expectancies.
The commissions report will shape the coming debate over changing Social Security from a government-financed program that offers a poor 1 percent to 2 percent return to one that allows workers to reap much richer returns on investments in stocks and bonds.
That is why strategists who are advising the administration say it is critical that the panel keep the focus of reform on wealth creation and on individual ownership of financial assets that will lead to a more comfortable retirement and which can be willed to heirs.
"Its important that the commission recognizes both the urgency of Social Security reform and that Social Security reform extends beyond the question of solvency," said Michael Tanner, the chief Social Security analyst at the Cato Institute, which has two of its top people working at the commission.
Mr. Tanner was especially pleased that "so many members of the commission focused on issues such as wealth creation."
Because this is the central issue. Democrats are talking about creating "add-ons" to Social Security, not unlike Al Gores government-subsidized savings plan, that would allow workers to invest in the markets separately from Social Security. But that would do nothing to solve Social Securitys overriding problem: its paltry 1 percent to 2 percent return for most workers, and in the case of many minority-group members, a negative return.
Acknowledging that the only way to improve the systems finances is to invest in the stock markets, President Clinton suggested late in his term that the government should do the investing. But that idea, raising the specter of government ownership of the economy, is strongly opposed by most Americans.
Mr. Bush hopes that the issue will be taken up by Congress in 2002, but it is unlikely that anything that is so viscerally opposed by the Democrats, who will pull out all the stops to kill it in the Senate, can make any headway in a midterm election year.
This is an issue that needs to be fully thrashed out in the next election cycle, then taken up in 2003. If the Republicans market it effectively as a wealth-creation plan, it can help them take back the Senate and build a stronger majority in the House.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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