- The Washington Times - Monday, June 5, 2000

My father spent many days at the race track in his retirement years, and he observed that he could always tell the day the Social Security checks arrived. The players at the track were flush with cash.

FDR didn't foresee Social Security checks being spent at the races, but of course how the players spent their checks was none of the government's business. Social Security brought the government and workers together in a payroll partnership, but when it came time for the working stiffs to take out what they had put in they could do whatever they wanted to do with the money. That's the American way.

It's the British way, too. When Winston Churchill introduced the idea of unemployment insurance in the House of Commons, Tory colleagues were against it because the working blokes would spend the money at the pub. That's fine, Churchill said. "It's their money." Observes Sen. Daniel Patrick Moynihan: "Whereupon a first principle was established."

Now George W. has introduced a second principle. The working stiffs ought to have more of their Social Security money to spend as they please. That's the point of his voluntary program of privatizing 2 percent of the payroll tax for individual investment in stocks and bonds.

Over a 20-year period, the stock market is up, up, up. "The average long-term return on stocks is nearly 8 percent a year," according to a study by the Cato Institute, a think tank in Washington. "Social Security's future return of 2 percent is so low that even investing in safe government bonds would leave workers better off."

Al Gore calls the Bush proposal "a risky scheme," but it establishes the necessary criterion for change in Social Security: It has no "downside" risk. The government will guarantee to those who create a personal investment account that they'll earn the same return they would under the current system. The big difference is that they have a chance of earning considerably more. The accounts will be funded by Social Security surpluses and the future earnings generated by the private accounts could eventually reduce the government's burden, too.

Al Gore is trying to scare seniors into believing they'll lose benefits. But W.'s plan contains another necessary principle: Current recipients and those approaching retirement age will receive what they have been promised.

The Gore campaign licked its chops when W. dared bring up the privatization issue touching the "third rail of American politics." The veep was counting on that third rail as a fatal shock to his opponent's campaign. But Mr. Gore's mantra "risky scheme, risky scheme" hasn't stuck. Polls actually show increasing interest and support for the Bush proposal.

Conventional wisdom says that the plan is a natural for aggressive boomers who know how to invest in stocks and bonds, but it will hurt those who need the money most, the working poor and minorities who aren't sophisticated in matters of investment.

But stock ownership isn't as elitist as it used to be. The New York Stock Exchange estimates that at least 10 million families with incomes under $25,000 own stock. Half of all stock owners have incomes of $50,000 or less.

Last year Mark Penn, a White House pollster, found that 62 percent of Hispanic voters want the government to "make it easier for individuals to invest a portion of their payroll taxes in personal savings accounts." The Joint Center for Political and Economic Studies, a think tank for issues of interest to blacks, found 62 percent of blacks support privatizing a portion of Social Security. Polls show that twice as many people favor some kind of privatization than oppose it.

The idea also has support from several powerful Democrats, including Sens. Bob Kerrey of Nebraska, John Breaux of Louisiana, Charles Robb of Virginia and Pat Moynihan. Mr. Moynihan doesn't like the label "privatization." He prefers to describe the idea as a "savings plan" with government matching funds. By whatever name, it's W.'s fundamental idea.

Presidential politics aside, the time seems at hand for consideration of privatization precedents in Chile, Australia, Great Britain, Poland, Hungary, Mexico, Colombia, Peru and even Sweden, the bastion of compassionate socialism. Robert Moffitt of the Heritage Foundation analyzed the privatized pension system in Great Britain, where data suggest it could pay off the entire national debt by 2030.

Under George W.'s limited privatization proposal for Social Security, the sacred cow that no one could imagine disturbing may be about to give birth to a fatted calf. It looks tasty. It makes economic dollars and common cents.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide