- The Washington Times - Thursday, May 9, 2002

Perhaps the most intriguing political question to be settled in this year's elections is whether a majority of voters will give Republican congressional candidates a mandate to create Personal Social Security Retirement Accounts, or whether a majority will vote for Democratic candidates who want to keep Social Security just the way it is now, shoring it up with higher taxes and continually anemic benefits.

The Democrats are betting that President Bush's proposed reform to permit workers to voluntarily invest some of their payroll taxes in stock and bond funds will be the GOP's undoing. That the Enron debacle and the two-year bear market will combine to give them a deadly political issue that will propel them to victory in November.

But all the polling thus far indicates Americans are made of sterner stuff and are not cowed by the ups and downs of the financial markets or swayed in their belief in the long-term strength of the American economy.

Consider a poll taken several months after the Enron scandal exploded in October. A survey of 1,011 Americans by the University of Connecticut's Roper Center found that 63 percent supported Mr. Bush's plan.

In March, another National Public Radio survey asked 1,500 registered and likely voters, "Would you support or oppose a plan in which people who choose to could invest some of their Social Security contributions in the stock market?" The answer: 55 percent said yes and 39 percent said no.

Notably, this survey, conducted jointly by Democratic and Republican polling firms, addressed the Enron scandal in its question and pointed out the huge stock losses suffered by "thousands of Enron employees whose pension funds had been invested in the company stock." Still, majority support for Mr. Bush's plan remained strong.

Another measurement of whether the Democrats will be able to exploit the politics of Enron can be found among today's investors. Even in the aftermath of the Enron scandal, "There has been no indication that the mutual fund investors have lost faith in the equity market," said John Collins, spokesman for the Investment Company Institute, which surveys investments for the government each month.

What House and Senate Democratic leaders still do not get and have not factored into their fear campaign is Social Security's worst feature and the central rationale that is driving the reform movement: its pathetic 1 percent to 2 percent return after a lifetime of work and deeply regressive payroll taxes.

The Democrats and their political allies never address this issue because they say workers should be satisfied with anemic returns, in some cases negative returns, for the good of the whole program. These same leaders, of course, heavily invest their federal pension contributions in government stock and bond plans of their own, but that's not for the little people, they say.

How much more could ordinary workers expect to receive from personal retirement accounts if the Bush reforms were enacted? I asked the Heritage Foundation's Center for Data Analysis to crunch the numbers for me on a broad cross-section of workers. Here's what they came up with:

• A 23-year-old lower-income male earning $15,175 a year will get $965 a month from Social Security under current law. But he would receive $1,180 a month under Mr. Bush's reform plan, a 22 percent increase.

• A 32-year-old higher income male making $46,380 a year, who can expect to get $1,835 a month from Social Security when he retires, would receive $2,050 a month, a 12 percent increase.

• A 35-year-old moderate-income female earning $25,650 a year, who will get $1,225 a month from Social Security, would receive $1,390 a month, a 13 percent increase.

All these examples are calculated on their average annual income in their highest earning 35 years. Their payroll contributions to their Personal Retirement Accounts would be 4 percent of wages, not exceeding $1,000 a year.

The yield on their investment portfolio is conservatively calculated at 4.7 percent after accounting for inflation and administrative fees. The reform plan's full retirement benefits would consist of Social Security payments, financed partly by the plan's annuity, with the remainder of the annuity providing additional monthly income.

In many cases, of course, the returns on investment over a working career will be far higher than figured here, depending upon whether investments are made in stocks or bonds.

There is a reason why 93 million Americans 1 in 3 adults are invested in stock mutual funds and that number is growing each year. People are dissatisfied with the poor return from Social Security. The more they understand the higher yields they can get over their working lives from Mr. Bush's proposals, the stronger the Social Security reform movement will become.


Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.


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