- The Washington Times - Monday, June 26, 2000

Al Gore's campaign proposal to encourage Americans to save more for their retirement is a bad plan because

it would saddle taxpayers with another costly federal entitlement and do nothing to save Social Security.

First, let us be honest. Mr. Gore was forced to come up with this plan because of the huge popularity of George W. Bush's proposal to give workers the option of putting part of their Social Security payroll taxes into wealth-creating mutual-fund investments in stocks and bonds.

Mr. Bush's proposal is getting the enthusiastic support of nearly two-thirds of all voters. But until last week, Mr. Gore was left hanging high and dry on the issue of helping workers build a more secure and comfortable retirement. He didn't have a clue how to counter this politically powerful proposal that strongly appeals to the nation's abiding belief in the strength of America's free-enterprise economy.

So, in an act of political desperation, Mr. Gore's advisers hastily dusted off Bill Clinton's old USA Savings Accounts proposal (which went nowhere in this Congress), renamed it "Retirement Savings Plus," and threw it out as a bone to the voters.

For Mr. Gore, who doesn't have the courage of his convictions, the plan was yet another switch in policy. After bashing Mr. Bush's Social Security reform plan as a "risky scheme" because it would let workers invest in the stock market, Mr. Gore's plan would encourage workers to invest in you guessed it the stock market.

Under his new spending scheme, the government would give out large cash grants which The Washington Post calls "extremely generous" to participating workers. The grants, or subsidies, which would cost taxpayers hundreds of billions of dollars, are heavily tilted toward lower-income people.

For example, workers earning less than $15,000 and couples making below $30,000 would be given $3 for each dollar they invest up to $2,000 a year. The matching-grant subsidy is gradually reduced and eventually phased out for higher-income workers. It drops to 33 cents for every dollar saved for those making more than $60,000.

There are a number of things seriously wrong with this plan.

For one thing, with Congress struggling to find new ways to pay for the social-welfare entitlements we already have, such as Medicare and Medicaid, is this the time to be creating another costly entitlement?

Mr. Gore's 10-year estimate puts the plan's cost at $200 billion when it is fully phased in by 2009; but more than likely the cost of his plan is woefully underestimated. And the money will come out of general revenues that may be needed to ensure that Medicare is solvent for a fast-growing aging population.

Meanwhile, where is the fairness in giving one group of income earners a big subsidy to save and invest, but little or nothing to another? A couple with four or five children, living on $65,000 a year, arguably may have more of a need to save and invest than a couple with no children earning $30,000 a year.

Moreover, Mr. Gore's plan does nothing to address the critically serious problems that beset the Social Security system. He simply leaves the New Deal-era program the way it is facing insolvency and a growing mountain of trust-fund debt.

He does not solve the giant retirement system's huge long-term $20 trillion taxpayer liability, which future taxpayers will have to pay one way or another, either through higher payroll taxes, benefit cuts or both. Outside of pouring the Social Security surplus into paying down the national debt, Mr. Gore is content to leave such problems to future generations.

Nor does he attempt to correct the pitifully low 1 percent to 2 percent investment return most workers will get for their hard-earned payroll taxes. Many, especially poor and low-income minority-group members, will get a negative return.

Instead, Al Gore's answer to these problems is a federally subsidized scheme based on the same old redistributive formula that got Social Security into the trouble it is in now.

Compare Mr. Gore's approach with Mr. Bush's plan, which would solve two problems at once.

Mr. Bush would let ordinary workers build substantial retirement wealth by putting a relatively small part of their payroll taxes into the kind of safe, secure investment funds Al Gore has helped to make available to well-paid federal employees.

As workers' private retirement funds grow, their Social Security benefits would gradually decline, and thus the huge tax liability that now burdens future generations of taxpayers and businesses would shrink dramatically, too. A huge drag would be removed from the economy, which would strengthen future growth.

The dramatic difference between the two approaches is that Mr. Bush uses the power of American economic expansion and compound interest to grow us out of the fix we're in, while Mr. Gore is betting that another federal giveaway will make us forget the immense long-term problems we face.

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

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