Democrats come up short

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Based on their numerous TV appearances on Sunday, Democrats clearly have their Social Security talking points in order. Democrats were very big on accusations and demands, and very light on substance and solutions.

One pervasive Democratic accusation dated back to a 1978 political campaign, when then-House candidate George W. Bush said, "Social Security would go bust in 1988" unless its long-term solvency problems were addressed through personal retirement accounts, according to Sen. Barbara Boxer. "He was wrong then," Mrs. Boxer said on "Face the Nation." The California liberal demanded to know: "Who do you trust on Social Security?" Based on his views over more than a quarter century, Mrs. Boxer concluded: "I think President Bush should not be trusted."

Charging that the voluntary personal retirement accounts advocated today by Mr. Bush would represent "the destruction of Social Security," Sen. Ted Kennedy chastised the president for "advocat[ing] this back in 1978." Mr. Kennedy said on "This Week" that Democrats would not be "stampeded by a president who was against [Social Security], who was for privatization in 1978."

As it happens, in 1978 Mr. Bush was more optimistic about Social Security's finances than reality warranted. In fact, the Social Security crisis occurred in 1983, five years earlier than he projected. Washington addressed the 1983 Social Security crisis by raising the retirement age, which effectively cut benefits, and by increasing payroll taxes, which generated huge Social Security-related cash surpluses.

For the next 15 years, there was bipartisan agreement to use those cash-flow surpluses to fund non-Social Security governmental programs. Indeed, since retirement benefits were cut and payroll taxes were raised in 1983, Washington's policy-makers have managed to keep their hands off the entire off-budget surpluses generated by Social Security only in 1999 and 2000, when the 1997 bipartisan balanced-budget agreement generated on-budget surpluses.

History records that Washington waited for the crisis to erupt in 1983 and then reacted to it by raising taxes immediately and cutting long-term benefits. In addition to generating huge Social Security cash-flow surpluses for politicians to milk, that solution maintained the retirement system's teetering pay-as-you-go Ponzi scheme for a few more decades.

Given the vitriolic charges of Mr. Kennedy and Mrs. Boxer, it is fair to ask: What would have happened if Washington implemented the personal retirement accounts advocated by Mr. Bush in 1978? In the first place, there would not have been any Social Security cash-flow surpluses, which Washington has been looting to fund other programs. Instead, personal lockboxes would have been created to hold real assets, which would have enjoyed phenomenal growth. Indeed, the Dow Jones industrial average, which is approaching 11,000 today, was a relatively minuscule 820 in 1978. The broad-based Standard & Poor's 500-stock index, which is near 1,225 today, was 96 in 1978. And the Nasdaq composite index, even after falling from more than 5,000 in March 2000 to about 2,100 today, is still -- today -- nearly 18 times its 1978 level of 118.

Mr. Kennedy had already been a U.S. senator for 17 years when the 32-year-old George W. Bush offered his proposal for personal retirement accounts in 1978. If Mr. Kennedy had embraced Mr. Bush's idea in 1979 and introduced legislation to that effect and worked for its passage, nobody would be discussing Social Security's problems today. And Mr. Kennedy would be regarded as a national hero, whose retirement-policy credentials would exceed those of his hero, FDR. Instead, Ted Kennedy is a just politician who came by his own fortune the old-fashioned way -- by inheriting it.