- The Washington Times - Sunday, August 26, 2001

The President's Commission to Save and Strengthen Social Security reconvened to examine reform options. The commission has documented in its first report that doing nothing is about as sensible an option as allowing the Titanic to move full steam ahead to the iceberg.
Left-wing fringe groups want to do just that. They have staged protests claiming that the commission's true agenda is to "destroy Social Security," as House Minority Richard A. Gephardt and so many others have alleged. But the hysteria is a proof positive sign that opponents of personal accounts are getting desperate and are losing the hearts and minds of American workers, who want to get more for their money.
Privatization is regarded by liberal Democrats as a frontal assault against the nanny state cradle-to-grave fortress that was first erected by Franklin D. Roosevelt some 60 years ago. They are actually quite right about that. Privatize Social Security and the rest of the New Deal/Great Society welfare state will come a tumblin' down.
So the stakes are high. The commission had better get the plan right — both from a financial and political standpoint — so that they don't give Mr. Gephardt and his cronies a big red round bull's-eye to shoot at.
The first thing they ought to do is call on Rep. Jim DeMint, South Carolina Republican, who has drafted a savvy and sensible private investment plan. Mr. DeMint's brainchild promises to get us to a fully private retirement system within a generation, faster and with less political resistance than any plan I have seen.
Mr. DeMint recognizes that tactically, it makes sense to pre-empt the strongest argument that the left has against private investment accounts. Opponents really only have one semi-persuasive argument: that private investment in the stock market is "too risky." In this lousy stock market, that argument has an aroma of truth to it. Most Americans lost money in their 401K plans last year for the first time in anyone's memory. The bearish market reinforces the message that stocks are too risky to gamble your retirement dollars on. (Let's set aside the fact that now may actually be the ideal time for workers to begin investing their payroll tax dollars, when the market is down, down, down. Buy low, sell high is the first rule of investing.)
The brilliance of the DeMint plan is that it guarantees a benefit no lower than Social Security would offer and thus removes virtually all of the "risk" from private investment accounts. His legislation, called the Social Security Personal Ownership Plan, is modeled after the Thrift Savings Account Plan that is now offered to federal workers, including, by the way, members of Congress. It has the added attraction that it is completely voluntary for workers. Those who don't want to control their own accounts may stick with Social Security.
The. DeMint plan is also geared toward helping the lowest wage workers the most. He would allow factory and service workers, for example, to immediately invest as much as 8 percentage points of the 15.3 percent payroll tax into private investment accounts. Higher wage workers would start with a 3 percentage point diversion of the payroll tax into private accounts. President Bush's proposal only allows low-wage workers to divert 2 percent of their paychecks to IRA accounts. This means that lower income workers would be able to acquire real wealth much faster than under the Bush plan. This progressive feature of the proposal also solves the practical problem with some plans that lower wage workers might not be able to put enough money into their personal accounts (if the cap were 2 percent) to cover the administrative costs of private accounts.
The DeMint plan also overcomes the "transitional financing" problem that has liberal critics of privatization all hot and bothered. The DeMint plan would pay for current benefits out of payroll tax revenues plus borrowing from the on-budget surplus that is projected over the next dozen years or so. In fact, Mr. DeMint has run the numbers with the help of Social Security actuaries, and what he has found is that whereas the "do nothing" option would require an unfathomable $22 trillion of new debt over the next 75 years, the DeMint plan lowers that accumulated deficit by two-thirds because of the higher rate of return private investment offers. Any American 20 years of age or younger, could rely exclusively on the earnings from the personal accounts, and wouldn't need a dime of Social Security.
I have always believed that the three key components of Social Security private accounts are:
(1) No benefit cuts for seniors or near seniors. Social Security's promises need to be kept for the elderly and near-elderly.
(2) The plan should be voluntary. No one should be forced to join.
(3) Every worker should be guaranteed a minimum benefit payment when they retire, regardless of how poorly their accounts might do.
To my delighted surprise, I learned last week in a meeting with Mr. DeMint that these are precisely his priorities as well. "Access to real personal financial wealth should not be reserved for the privileged few," Mr. DeMint says.
Mr. Bush and the members of his commission should adopt this model plan as their own. No other plan to my knowledge allows even the lowest income workers to build-up real castles of wealth more quickly and efficiently than the DeMint plan.
The plan is bullet proof.
"Reforming Social Security is our generation's D-Day," Mr. DeMint says. "To leave future generations with the multitrillion-dollar debt of pay-as-you-go Social Security is the coward's way out."
He's right, of course. The question is whether there are more patriots than cowards on Capitol Hill these days.

Stephen Moore is president of the Club for Growth.

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