- The Washington Times - Friday, December 28, 2001

Now that the President's Commission to Strengthen Social Security has released its long-awaited report, the Democratic Party is licking its collective chops. In the national service, the bipartisan commission has devised three options, each of which would allow workers to invest part of their payroll taxes in the stock and bond markets in order to earn returns higher than those offered by the traditional Social Security system. Democratic politicians and strategists have made it clear they intend to demagogue the issue of Social Security the same way they have demagogued Medicare in recent elections. And Republican congressional candidates seem to be dreading the debate.
Despite George W. Bush's successful presidential campaign last year, during which he repeatedly raised the issue of reforming Social Security by establishing voluntary private investment accounts funded by payroll taxes, Democrats continue to believe that Social Security lends itself to their trademark demagogic attacks, which are designed to scare the elderly and confuse the young. Democrats clearly have not been dissuaded by their failure to win two special elections for the House this year in Virginia and Arkansas, where they pilloried two eventually successful Republican candidates who supported partial privatization of Social Security. And Republicans have failed to gain any confidence.
"The 2002 election may answer whether Social Security is still the third rail of American politics," Bill Buck, spokesman for the Democratic National Committee, told Donald Lambro of The Washington Times. "Where Republican candidates and incumbents endorse plans that will cut benefits," gleefully added Kim Rubey, a spokesman for the Democratic Congressional Campaign Committee, "they will do so at their own peril." Republicans, regrettably, literally seemed to be shaking in their boots at the prospect of defending the reform of Social Security through the establishment of private investment accounts. "The Republican candidates are not going to be buying a lot of stock in the commission's report," one GOP strategist told Mr. Lambro, while another predicted that Republican candidates would be treating the commission's proposals "very coldly." The only part of the commission's report that Republicans seemed to embrace was its recommendation to wait a year before enacting legislation to reform Social Security.
If anything was learned by the lost opportunities of the previous administration, it should have been that delay will only make the eventual cost of reform all the more expensive. As a matter of fact, time for reform is rapidly running out. Moreover, as former Democratic Sen. Daniel Patrick Moynihan and AOL Time Warner CEO-designate Richard Parsons, who served as co-chairmen of the commission, made explicitly clear in their introduction to the report, "Social Security is in need of an overhaul. The system is not sustainable as currently structured." Thus, reform is not merely an option; it is a necessity.
To be sure, any reform will entail substantial transition costs. But the commission's recommendations involving private investment accounts in stocks and bonds whose historical returns have consistently exceeded Social Security's projected returns would greatly benefit from what Messrs. Moynihan and Parsons rightly describe as the "magic of compound interest." Official Social Security actuarial estimates of the return on currently scheduled contributions range from less than 1 percent on the high side to less than zero on the low side.
Today, nearly 100 million individuals representing more than 50 percent of U.S. households already own shares in mutual funds that comprise seemingly infinite variations of stocks and bonds. At the same time, the vast majority of the nation's young workers favor gaining an irrevocable, bequeathable property right in their Social Security retirement fund, a right that does not exist today. The argument for private investment accounts begs to be made.

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