- The Washington Times - Sunday, October 29, 2000

George W. Bush has accused the Clinton-Gore administration of squandering one opportunity after another to address the long-term problems of Social Security, the government's largest entitlement program. Mr. Bush's accusation is, of course, true. However, what he has perceived, perhaps naively, as simply a refusal to spend the political capital and make the hard decisions has instead proved to be a hard-edged political decision by the Clinton-Gore administration to leave an unreformed Social Security program on the table for yet another election in order for it to be exploited and demagogued. It is also now clear that the administration's rejection of the bipartisan Medicare reform commission's proposals was also politically inspired. Indeed, Mr. Gore and the Democratic Party have been shameless in their desperate efforts to scare the elderly into voting for Mr. Gore in Florida, Pennsylvania and other pivotal states.

Both presidential candidates have committed themselves to dedicating the 10-year projected Social Security surpluses, which total $2.4 trillion, solely to the Social Security program. However, insofar as any long-term reform of Social Security is likely, it is now clear that only a Bush presidency offers the opportunity in the critically important next few years for the nation to address the program's unfunded liabilities, which the Clinton-Gore administration itself has estimated to be nearly $20 trillion. Meanwhile, Mr. Gore has emerged as the status quo candidate who has foreclosed any responsible action however long a Gore administration might last. The window of opportunity, which is rapidly closing, will be virtually shut by 2008 as the nation's relatively flush retirement accounts move closer and closer to the day when unmanageable deficits will make any corrective action all the more painful.

The problem has been well-known for years. The pay-as-you-go Social Security system offers increasingly paltry returns, currently averaging about 2 percent, to its beneficiaries. As the 76-million-strong baby boomer generation begins to retire later this decade, over time there will be fewer and fewer workers relative to an expanding retirement population whose longevity has been relentlessly increasing. While payroll taxes currently generate substantial surpluses beyond present obligations, that trend will inevitably be reversed.

Complicating the future is the fact that the so-called Social Security Trust Fund, where Social Security surpluses and applicable interest payments have been euphemistically "deposited," is nothing more than a collection of IOUs, which can be effectively redeemed only by raising taxes, reducing retirement benefits, increasing borrowing or cutting other federal government expenditures. Moreover, even if these Social Security surpluses are used to retire the federal debt held by the public, which is their current use (until recently Social Security surpluses were irresponsibly used to finance unrelated programs), the gross federal debt will remain essentially unchanged. This is because debt in the Social Security Trust Fund those IOUs backed by no real assets will increase for each dollar decrease in debt held by the public.

The beginning of a long-term solution must be an increase in the rate of return that future beneficiaries realize from their payroll taxes. Committing to current retirees and those who will soon retire that their benefits will not be reduced, Mr. Bush has proposed to permit younger workers to voluntarily invest a portion of their payroll taxes perhaps 2 percentage points of the 12.4 percent Social Security tax in personal investment accounts, including relatively safe, higher-yielding stocks and bonds. "From 1925 to 1997," the Joint Economic Committee recently reported, "the Standard & Poor's 500, a broad-based index of large-company stocks, earned an average annual [inflation-adjusted] rate of return of 7.7 percent." Compare this figure with the less than 1.25 percent inflation-adjusted return that a 30-year-old, two-income couple earning average incomes can expect to receive from Social Security.

Mr. Gore, who in 1999 rhapsodically endorsed diverting a portion of Social Security taxes into the stock market as long as the federal government, and not the workers, controlled the investments, has been attacking Mr. Bush's proposal since he made it in May. In recent weeks, however, Mr. Gore's demagoguery has reached a fevered pitch, even measured by his own standards.

The widespread distribution of stock ownership not only will address Social Security's looming crisis, enough reason to elect Mr. Bush. But such a trend would also provide the deathblow for unrestrained liberalism, offering a second reason a Bush presidency would be so beneficial. Indeed, as a recent Investor's Business Daily poll revealed, Mr. Bush holds a 50-percent-to-39-percent lead over Mr. Gore among stock investors. The Bush advantage among male investors is 56-32. Female investors prefer Mr. Gore, 46-44; but that margin is down sharply from a 49-36 Gore advantage that prevailed before the vice president began his attacks. Mr. Gore leads by 14 percentage points among non-investors. No wonder Mr. Gore and the Democratic Party are so obsessed with maintaining the status quo, even at the expense of the long-term health of the nation's retirement system.

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