- The Washington Times - Sunday, August 18, 2002

White House economic adviser Lawrence B. Lindsey says it would be worth borrowing $1 trillion to implement President Bush's plan to allow workers to devote part of their Social Security taxes to stocks or other investments by creating personal savings accounts.
"What you have to do is remember you're making the government better off by $4 trillion over time" through such a change in Social Security, Mr. Lindsey said in an interview that aired yesterday on CNN's "Novak, Hunt and Shields."
"If you can improve the balance sheet of the federal government by $4 trillion, there's no trouble temporarily borrowing money to do that," he added.
A presidential commission that studied Social Security reform said it would cost $1 trillion to pay for the transition to what's been called a "partial-privatization" system to cover payments already owed retirees in the entitlement program for seniors.
Many Democrats oppose such a change. Also, as congressional elections draw near, a growing number of Republican lawmakers have criticized the president's plan because of the ailing stock market and widespread public fear about putting money where it might not be safe.
Asked on CNN if the president's partial-privatization plan makes sense, given the less-than-robust economy, the loss of a federal surplus and the recent meltdown in the stock market, Mr. Lindsey replied:
"It makes even more sense to do it. Because the bottom line, from what the commission said, is that right now, we have an actuarial hole in Social Security of something like $4 trillion. The plan that the commission recommended would eliminate that hole, meaning the fiscal position of the United States would be better off by $4 trillion than it is now."
Mr. Lindsey readily acknowledged that there "would be transition costs," and he did not dispute the $1 trillion figure. "But the fact is, those transition costs would be more than made up by gains from the reform, and we'd wipe out the current hole in Social Security," he said.
As for those worried about their financial security after such a change, Mr. Lindsey said, "The only guarantee in Social Security today is that, under current law, if we don't make any changes, sometime in the 2030s, every American on Social Security is going to get a 30 percent cut in their benefits."
"I think that's wrong. I think we have to do something to stop it, and the best time to stop it is right now," he said.
In the interview, co-host Robert Novak reminded Mr. Lindsey that the president's chief economic adviser had sold all of his stocks when the market began to dip.
Noting that the stock market is "on the way back now," Mr. Novak asked Mr. Lindsey if he would consider re-investing in the stock market to help boost the U.S. economy, restore consumer confidence or "just as an act of patriotism."
Mr. Lindsey said he sold his stock "because I have three kids, and, at that point, I have an ailing mother-in-law who had just moved in with us."
"I couldn't afford to have money anywhere but where it was safe. I couldn't take any chances," Mr. Lindsey said.
He added, "I still have the three kids, and my pay's gone down now that I work for the government. I would recommend that all Americans look at their own financial condition and not risk money."
Pressed about whether he doesn't feel it is necessary to make a stock purchase as a patriotic act, Mr. Lindsey replied, "Get Congress to give us all a raise, and I'll invest."
He said there is "no question that there is a lot of perceived risk in the markets now" but commended the Federal Reserve for "keeping interest rates low."
"The fact that the American economy is growing three straight quarters and is growing at a 3 percent rate, I think is pretty good," he said, given that the nation is "coming out of a recession" and was attacked by terrorists.
"We're going to have a deficit this year of about 1.5 percent of GDP. That's below the historical average," Mr. Lindsey said of the gross domestic product.

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