<<Bulletproof
A plan for Social Security reform the Dems will hate.
Stephen Moore
Mr. Moore is president of the Club for Growth
August 22, 2001 3:10 p.m.
Today the President's Commission to Save and Strengthen Social Security reconvenes to look at reform options. The commission has shown in its first report that doing nothing is about as sensible an option as allowing the Titanic to move full-steam ahead to the iceberg.
Left-wing fringe groups want to do just that and are expected to protest the commission's deliberations with hysterical claims that the Republicans want to "destroy Social Security," as Dick Gephardt and so many others have alleged. But the hysteria is a proof-positive sign that opponents of personal accounts are getting desperate and are losing the hearts and minds of American workers, who want to get more for their money. Privatization is regarded by liberal Democrats as a frontal assault against the nanny state cradle to grave fortress that was first erected by FDR some 60 years ago. They are actually quite right about that. Privatize Social Security and the rest of the New Deal/Great Society welfare state will come a tumblin' down.
So the stakes are high here. The commission had better get the plan right — both from a financial and political standpoint — so that they don't give Gephardt and his cronies a big red round bulls eye to shoot at.
The first thing they ought to do is call on Congressman Jim DeMint, the 3rd term South Carolina Republican, who has drafted a savvy and salable private investment plan. DeMint's brainchild promises to get us to a fully private retirement system faster and with less political resistance than any plan I have seen.
DeMint recognizes that tactically, it makes sense to preempt the strongest argument that the left has against private investment accounts. Opponents really only have one semi-persuasive argument: that private investment in the stock market is "too risky." In this god-awful stock market that argument has an aroma of truth to it. Most Americans lost money in their 401K plans last year for the first time in anyone's memory. The bearish market reinforces the message that stocks are too risky to gamble your retirement dollars on. (Let's set aside the fact that now may actually be the ideal time for workers to begin investing their payroll tax dollars, when the market is down, down, down. Buy low, sell high is the first rule of investing.)
The brilliance of the DeMint plan is that it removes virtually all of the "risk" from private investment accounts and thus clears away the biggest obstacle to privatization. His legislation, called the Social Security Personal Ownership Plan, has the added attraction that it is completely voluntary for workers. It also allows lower income workers to privately invest a much higher portion of their payroll tax dollars in these accounts than even President Bush is seeking. A McDonalds burger flipper would be able to put up to 8 percentage points of the 15.3% payroll tax into private investment accounts. In other words, lower income workers would be able to acquire real wealth much faster than under the Bush plan. This progressive feature of the plan gets around the practical problem that lower wage workers wouldn't be able to put enough money into their personal accounts (if the cap was 2%) to cover the administrative costs of private accounts.
The DeMint plan also masterfully overcomes the "transitional financing" problem that has liberal critics of privatization all hot and bothered about. The DeMint plan would pay for current benefits out of payroll tax revenues plus borrowing from the on-budget surplus that is projected over the next dozen years or so. In fact, DeMint has run the numbers with the help of Social Security actuaries, and what he has found is that his plan requires several trillion dollars less debt over the next 50 years than if we were continue with this insane pay-as-you go recklessness. Any American 20 years of age or younger, could rely exclusively on the earnings from the personal accounts, and wouldn't need a dime of Social Security.
I have always believed that the three key components of Social Security private accounts are as follows:
1) No benefit cuts for seniors or near seniors. Social Security's promises need to be kept for the elderly and near-elderly.
2) The plan should be voluntary. No one should be forced to join.
3) Every worker should be guaranteed a minimum benefit payment when they retire, regardless of how poorly their accounts might do.
To my delighted surprise, I learned last week in a meeting with Rep. DeMint in his Capitol Hill office that these are precisely his priorities as well. (Great minds think alike.) The DeMint plan offers an actuarially sound mechanism for getting the U.S. to a fully private retirement account system within 20-25 years — or within about one generation. "Access to real personal financial wealth should not be reserved for the privileged few," DeMint's proclaims.
President Bush and the members of his Commission to Save and Strengthen Social Security should adopt this model plan as their own. Congress should pass it into law pronto. No other plan to my knowledge allows even the lowest income workers to build-up real castles of wealth, more quickly and efficiently than the DeMint plan. The plan is bulletproof.
The rallying cry for this legislation ought to be Karl Marx's famous plea: Workers of the world unite. All you have to lose is your chains. It says a lot about the leftist mentality that even the most devout socialists in Congress don't want that to happen>> |
