- The Washington Times - Tuesday, February 5, 2002

The reactionary wing of the Democratic Party is all giggly over the prospect of using the Enron scandal to smear President Bush's proposal to allow workers a personal account option for Social Security.

Thousands of Enron employees lost a huge proportion of their 401(k) retirement accounts when the Enron stock they were holding became worthless. Aha, the reactionaries exclaim, doesn't that prove that allowing workers the freedom to choose to invest some of their Social Security taxes privately in personal accounts is a bad idea?

Actually, No. The personal account option for Social Security has been designed precisely to avoid the problem experienced with Enron. The problem for Enron employees was that so many of them held such a huge proportion of their 401(k)s solely in Enron stock. That occurred because Enron long ran a promotion that gave workers one free share of the company's stock for every share they bought for their 401(k)s.

Such heavy concentration in one stock would be totally banned from the personal accounts serving as an alternative to Social Security. For those accounts, workers would pick a broadly diversified mutual fund from a list approved by the government. Those funds would be invested by major investment companies with the highest expertise. The funds would hold much less than 1 percent of their money in any one stock. So a collapse of one company would barely affect the personal retirement accounts at all.

This is how the Thrift Savings Plan for Federal employees is run. Workers pick from a list of investment funds managed by private investment companies approved by the government. There has been no Enron problem in that retirement plan. The same would be true for the personal account system.

So it is just another low-brow argument aimed at the gullible and uninformed rather than the intellect. And, frankly, that's all I have heard from the opponents of personal accounts.

It's just like the argument that with personal accounts there would no longer be any survivors or disability benefits (they would continue as today unchanged). Or personal accounts would result in a massive reduction of benefits of 30 percent or 50 percent or 70 percent (actually total benefits from the accounts and continuing Social Security would be much higher).

Fortunately, this low-brow argument is just not working. Just last month a USA Today poll found the public favoring President Bush's approach on Social Security over the approach of Congressional Democrats by a 20-point margin. A CNN/Gallup poll taken in November 2001 found the public favoring a personal account option for Social Security by 64 percent to 31 percent. That follows a long trend of media polls going back several years.

The personal accounts would provide enormous benefits for working people across the board. As the report of the President's Social Security Reform Commission affirmed, the accounts would reliably increase retirement benefits for future retirees. They would, in fact, progressively increase benefits for low income workers, blue-collar workers, African-Americans, Hispanics and women.

The accounts would, indeed, offer these groups their first real chance to accumulate savings and wealth like upper-income workers. The accounts would provide workers across the board with real personal ownership over their retirement funds, unlike Social Security.

The accounts would lead to higher economic growth, increased wages and more jobs. They would also reduce the unfunded liabilities of Social Security. The full explanation of all the benefits from a personal account option to Social Security is too long and involved to even begin to do it justice here.

So why are some people so vehemently against it?

For the old line, liberal-left, Washington establishment, the Social Security issue is all just a power struggle. If they allow any part of the $500 billion currently paid into Social Security each year to go into personal accounts instead, they lose control over that money. And they currently use that money to buy a lot of votes and a lot of dependency on their continued political power.

To the extent the money goes into personal accounts, then power passes from the old-line Washington establishment into the hands of working people all over the country. The workers would then each own and control the money. As they become financially independent, they would be freed of dependency on the old-line establishment's political machine.

We hear much from opponents of personal accounts of the great risk they would entail. Well, this is the risk they are really worrying about, the loss of political power and control.

Peter Ferrara is executive director of the American Civil Rights Union and a senior policy adviser to Americans for Tax Reform on Social Security.


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