- The Washington Times - Wednesday, February 16, 2005

Democratic leaders are practicing an old, well-known strategy they hope will kill President Bush’s plan to let workers build their own wealth-creating personal retirement plans. The Democratic strategy? Fear and demagoguery.

Their strategy was on full view last weekend at the Democratic National Committee’s winter meeting when House and Senate leaders were adding a new angle to their fearmongering charge that the transition costs of Mr. Bush’s Social Security reform plan will result in trillions of dollars in new borrowing and debt. Not just any old borrowing, but borrowing that “would add trillions of dollars in debt to foreign countries,” House Democratic Leader Nancy Pelosi told the DNC.

Senate Democratic Leader Harry Reid of Nevada also used the “borrowing from foreigners” line but added a more targeted description to the charge: The “money will have to be borrowed from countries like Japan or China,” he said.

Why single out those two Asian countries? U.S. Treasury bonds are sold worldwide to private lenders and central banks alike, from Britain to Brazil, as the world’s safest investment, backed by the full faith and credit of the U.S. government.

It is fortunate Mrs. Pelosi and Mr. Reid were not selling their ridiculous fear of borrowing from foreigners during the American Revolution. Were it not for the loans the Continental Congress got from the French, the Dutch and others, U.S. history might have turned out very differently.



But the Democrats’ attack lines are filled with such demagoguery based on unfounded fear of owning investments in stocks and bonds over one’s working life, fear of prudent, long-term borrowing now to save much more in later years and fear of Social Security benefits reduced a half-century from now as investment portfolios grow in size and wealth.

The Democratic claim the president’s plan would result in $40 trillion in benefit cuts is made up of whole cloth. Mr. Bush’s plan does not deal with the long-term transition costs or how benefits may have to be adjusted decades hence. All that will be negotiated in House and Senate tax-writing committees.

Democrats keep raising fear of the stock market and what happens if stocks go down. But workers would be limited to a small number of very diversified, broad-based, large corporate stock index funds or bond funds proven safe and lucrative over the history of investing. The plan also calls for a gradual, automatic shift of investments into safer bond funds to lock in gains as a worker nears retirement.

The Thrift Savings Plan’s stock and bond retirement funds for federal employees, on which the Bush plan is modeled, have delivered a 10-year average annual return of between 6 and 11 percent, much more than Social Security’s 2 to 3 percent.

While financing details remain to be worked out, Mrs. Pelosi and Mr. Reid should not fear borrowing to pay some or all of the costs because they know we do that already.

Surplus Social Security payroll tax revenues not needed to pay retirement benefits are loaned to the U.S. Treasury to meet its other spending obligations in exchange for bonds redeemable when the program benefits exceed payroll tax income.

Mrs. Pelosi and Mr. Reid never mention that the feds (actually, the taxpayers) owe the trust fund trillions of dollars that will have to repaid when the fund begins running out of money in about 20 years. Nor do they mention that Mr. Bush’s personal retirement accounts are popular with voters under age 50, a reality Mrs. Pelosi and Mr. Reid refuse to acknowledge.

“Generally speaking, voters under 50 have doubts about the system’s future and are attracted to personal accounts as a way of taking greater control of their retirement security,” the Democratic Leadership Council’s Progressive Policy Institute said in a recent analysis.

Progressive Policy Institute President Will Marshall noted this is part of the reason the Democrats’ attacks on the Bush plan defeated none of its GOP supporters in the 2002 midterm elections. None.

The DLC thinks its party is making a fundamental mistake in all-out opposition to personal retirement accounts and Mr. Marshall suggests if workers are to be allowed to build a more comfortable retirement, “it may well entail creating personal savings accounts funded by payroll taxes, general revenues or some combination of the two.”

Mrs. Pelosi and Mr. Reid should call the DLC as soon as possible. They could learn a thing or two about an idea whose time has come: First of all, the politics of fear won’t work this time.

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

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