George W. Bush expected Al Gore to play the fear card against his Social Security investment accounts plan. And, out of political desperation, that is exactly what Mr. Gore did this week.
In truth, workers and retirees have nothing to fear from Mr. Bush’s plan. It would allow workers for the first time to voluntarily invest a small part of their payroll taxes in safe, IRA-type mutual-fund investments that would grow at an average annual rate of about 7 percent, instead of the puny 1 percent to 2 percent gain that the Social Security system offers after a lifetime of work and taxation.
With polls showing strong support for the idea, even among Democratic voters, and especially among blacks and Hispanics, the Democratic Party’s largest and most loyal voting blocs, Mr. Gore decided his only option was to demagogue the heck out of it to play on people’s fears.
“Think about what happens when that first generation of Americans retires in a bear market. They would be left trying to live on worthless paper, and we as a nation could be left stuck with sky-high bailout costs,” Mr. Gore said Monday after Mr. Bush gave a speech promoting his plan.
What utter nonsense. And how disgraceful that the vice president has to stoop to fear-mongering that has no basis whatsoever in fact.
As most investors know, workers reduce their financial exposure in the stock market as they near retirement by gradually putting a larger share of their pension assets into safe Treasury bonds or some other no-risk debt vehicle, thus locking away the stock-market gains they have made over their working lives.
Moreover, under Mr. Bush’s plan they could put all of their tax contributions into safe government or AAA corporate or municipal bonds. They would still earn more than Social Security, says Martin Regalia, the U.S. Chamber of Commerce’s chief economist.
In a coordinated, full-court press against the Bush plan, the White House also played the fear card for all it was worth. “You’re talking about a plan that will likely mean deep cuts in Social Security benefits and is based on the fact that he hopes the stock market does well,” said Mr. Clinton’s press secretary Joe Lockhart. “And I think when you are talking about a guaranteed benefit program, you don’t base it on hope.”
This from a White House that just a year ago was proposing that Social Security funds be invested by the government in the stock market to boost its finances. Today they say that proposal is “no longer operative.”
In fact, Mr. Bush’s plan begins with premises that would be the basis of any reform package approved by Congress. Payroll taxes would not be raised. Benefits would not be reduced for retirees. No one on or near retirement would be affected by the plan in any way.
Throughout the history of the stock market, a broad, balanced portfolio of blue-chip corporate stocks has never lost money over any single 20-year period. The stock market’s average annual growth rate over the last half century has been 7 percent, a far better return than the trickle-down rate of return that the government offers. Indeed, for many younger workers, especially minorities, the rate of return will be negative.
What does Mr. Gore have to say about these people? The vice president is heavily invested in stocks and bonds. He enjoys double-digit returns on his money, which is locked away in a family trust fund. But he doesn’t want you to have that option with your retirement funds.
Government workers, of which Mr. Gore is one, are also given the option of putting their pension contributions into stocks and bonds. Sixty percent of their retirement money is invested in stocks under the government’s Thrift Savings Program. But Mr. Gore doesn’t want ordinary Americans to have the same opportunity that government bureaucrats have to create wealth.
Why are Mr. Gore and the White House making wild, reckless, patently untrue statements about the Bush plan? Because they have seen the polling data on this issue and it shows Americans are overwhelmingly in favor of Mr. Bush’s proposal. Fear tactics, long used by Democrats to defend the New Deal-era program from necessary, marketplace reforms, no longer work as they once did in the new investor-class economy.
Americans do not fear the stock market, because nearly 50 percent of households more than 80 million persons now are stockholders. These are long-term, buy-and-hold investors who are saving for retirement. They are not depending upon Social Security, because they know it will not be enough. Many doubt it will be there when they need it.
Mr. Bush’s plan is based on the simple, populist idea that Americans are fully capable of making better investment decisions with their own money than the government can and that the way to build wealth is to become a shareholder in the U.S. economy.
Mr. Gore’s defensive, status-quo position is based on the elitist belief that investing isn’t for the little people, and that the only way to save Social Security is to borrow more money to pay its future bills and thus pass the problem on to future generations.
This November, America’s workers will decide which course they want to take.
Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.