- The Washington Times - Tuesday, May 16, 2000

The long-awaited debate on George W. Bush's plan to let workers invest a small part of their Social Security payroll taxes to build a more comfortable retirement pits the old politics against the new politics.

Mr. Bush is betting that the U.S. investor class of up to 100 million, which has mushroomed in the past decade, will be drawn to the idea along with millions of younger, lower-income workers.

Independent polls show not only that a strong majority of Americans like Mr. Bush's idea, but that it is especially popular among blacks and Hispanics, two of the Democratic Party's largest and most loyal voting blocs.

With the vast majority of younger workers questioning whether they will ever get any Social Security benefits when they retire, and with most of the U.S. work force invested in Wall Street, Mr. Bush's own polls show that voters are comfortable with his idea and do not fear the usual ups and downs of the financial markets.

Vice President Al Gore, on the other hand, has positioned himself squarely against giving workers the choice of investing part of their earnings in IRA-type stock and bond mutual funds an idea that he calls "risky" and that the liberal base of his party considers a heretical assault on its oldest, most cherished social welfare program.

In many ways, the emerging debate is over two fundamentally different approaches to lifting Social Security's $11 trillion liability off the backs of future taxpayers: Letting workers benefit from the growth of the U.S. economy to build their own retirement nest eggs with investment yields of 6 percent, 7 percent or 8 percent per year vs. a tax-financed, static, welfare state program that will give future beneficiaries a much poorer 1 percent to 3 percent return on their investments over their working lives.

"Bush wants to share the benefits of that future growth rather than to hold today's workers to the minimalist standards of the welfare state," said Martin Regalia, chief economist at the U.S. Chamber of Commerce.

"The only way you are able to help people at the lower end of the income scale is to give them a piece of the economic pie that will grow over time with the economy," he said. "Gore's approach is to pay down the debt and borrow the money back later when you need it and that's not fixing anything."

Political and economic strategists said yesterday that Mr. Bush had seized the high ground in the debate, forcing Mr. Gore to defend a New Deal-era retirement system that is headed toward insolvency and has been rendered a poor deal by the new, fast-growth, investor class economy.

"This is a strategic stroke of genius because it forces Gore to make a ruthless attack on the opportunity to take a government promise and turn it into a real financial asset for people based upon the growth of the economy over the next 20 to 30 years," said Jack Kemp, a former Republican vice presidential nominee.

"Gore and President Clinton are mired in the past. They are defending the status quo. They are practicing the old politics and the old economics," Mr. Kemp said.

As expected, Mr. Gore and the White House unleashed a withering assault on Mr. Bush's plan yesterday, warning that it would destroy Social Security or force future benefit cuts to pay for it.

But Mr. Bush's supporters believe that Mr. Gore's "fear tactics," as they called them, would not work this time for several reasons.

First, the Bush plan is entirely voluntary and guarantees that anyone in or nearing retirement would not be affected in any way by the reforms. Moreover, there would be a social safety net to guarantee they would not receive anything less in benefits than they would under Social Security.

Second, the amount of payroll taxes that workers would be allowed to invest in pre-approved stock and bond mutual funds would be no more than 1 or 2 percentage points, a sum that Mr. Regalia calls "a very modest, prudent, financially conservative approach."

Mr. Regalia dismissed Mr. Gore's criticisms as "sheer demagoguery," noting that workers would have their choice of both stock and rock-solid safe U.S. government bond funds, or a combination of the two.

"As a matter of fact, Social Security rates of return have not even been as good as the government bond rate," he said.

Third, Mr. Bush's basic idea is supported strongly by some prominent Democrats, including Sens. Daniel Patrick Moynihan of New York, Bob Kerrey of Nebraska, John B. Breaux of Louisiana and Charles S. Robb of Virginia blunting much of the firepower of Mr. Gore's attacks.

It also is being pushed by the Democratic Leadership Council, the centrist Democratic group once led by Mr. Clinton and which has Sen. Joseph I. Lieberman of Connecticut as its chairman.

Most potentially troubling of all to Gore advisers is the support for the idea among their party's base.

When the Joint Center for Political and Economic Studies, a think tank that focuses on issues of interest to black Americans, polled voters last year, it found that 62 percent of blacks supported the idea.

A survey late last year by White House pollster Mark Penn also found substantial support for the idea among Hispanic voters.

The poll showed that 62 percent of Hispanic voters said they wanted the government to "make it easier for individuals to invest a portion of their payroll taxes in personal savings accounts."

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