- The Washington Times - Friday, May 5, 2000

Unnamed aides to George W. Bush have touched the so-called third rail of American politics. The Wall Street Journal said the aides were considering Social Security reform that would allow workers to set aside a portion of their payroll taxes to establish individual investment accounts. Given that Social Security may be one of the worst "investments" anyone could make since Charles Ponzi set up shop earlier this century, one would think there might be room for such reform.
Not according to Mr. Bush's likely Democratic opponent, Vice President Al Gore. Mr. Gore promptly rounded up reporters from The Washington Post to come over to the vice presidential residence, where he demagogued Mr. Bush's proposal as "survival of the fittest." The implication was that investors would be too busy looking out for their own interests to look after those of the elderly and poor.
Awkwardly for the vice president, it turned out that in his 1999 State of the Union, President Clinton himself proposed investing Social Security dollars in the stock market. The difference is that unlike Mr. Bush, Mr. Clinton would have had the government invest the payroll taxes, a plan ensuring that the savings of no one, no matter how fit, would survive.
To understand why Social Security ought to be up for discussion this campaign year, one needs to know only two facts. First, according to the 1999 Annual Report of the Board of Trustees of the Old-Age and Survivors Insurance and Disability Insurance Trust Fund (OASDI), Social Security's 75-year (2000-2074) projected unfunded liability i.e., the cumulative amount by which promised benefits exceed legislated payroll taxes totals more than $19 trillion in inflation-adjusted 1999 dollars. While this calculation assumes that the federal government spends the near-term (2000-2014) annual Social Security surpluses, as is the practice under current law, it matters little in the long run if those surpluses are used to retire the $3.6 trillion federal debt now held by the public.
The second reason Social Security needs to be debated this year the sooner the better is the certain fact that the economy would be unable to bear the burden of projected tax increases required to fulfill the system's unfunded commitments. The report cited earlier projected that annual Social Security deficits, which would begin in about 15 years, would reach more than $250 billion in 2030 and more than $500 billion in 2070. To meet the system's commitments, the report projected that OASDI payroll taxes, which now total 12.4 percent on the first $76,200 in income, would have to increase relentlessly throughout the period, reaching 19.5 percent by 2070.
Irrefutably, the current Social Security system is broken. The only conceivable way to fix it is to increase the absurdly low and falling returns that workers receive from the taxes they pour into the system. By permitting workers to invest part of their payroll taxes in stocks and bonds, which have historically outperformed the paltry return from the Social Security system, Mr. Bush's proposal would move in this direction. Over the long run, it is the only viable option. Whatever Mr. Gore may think about that plan, it's worth talking about.

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