W'S OLIVE BRANCH
New York Post
By STEPHEN MOORE
AT his press conference last Thursday, President Bush for the first time put meat on the bones of his proposal to modernize Social Security and save it from financial collapse.
Despite their relentless opposition, Bush included an enormous olive branch to Democrats — one that has some conservatives unhappy. But his reform package is still a winner for all Americans.
The president's plan would be a financial savior for young workers while safeguarding the benefits for the old. It would allow Americans to take one-third of their payroll tax for Social Security (or about 4 percent of every paycheck) and divert those funds into a personal IRA-type account that they themselves would own and control. As Bush has put it: "This is money that the government could never take away from you."
By tapping into the power of compound interest, the average American under the age of 30 would be able to accumulate more than $500,000 in these accounts by the time he or she reached retirement age. It is no wonder that the vast majority of 18- to 30-year-olds support this plan.
The challenge for the White House has always been to find a way to win over Democratic votes in Congress. President Bush's latest outreach to the Democrats is a proposal to slow the growth of future promised benefits for higher income and some middle-income workers. Social Security now faces a multitrillion-dollar unfunded liability; Bush's move would cut that by about half.
But benefits would still rise over the next 75 years —this is no "benefit cut." Factor in the $500,000 that workers would et from their personal accounts, and young workers do substantially better under this plan than they do under current law.
This plan to trim future benefits to higher income Americans would no doubt be warmly embraced by the "class warfare" Democrats as fair and balanced if it were say, Bill Clinton, who proposed it.
But congressional Democrats have shown themselves to be incapable of engaging in a grown-up discussion about how to modernize Social Security — a pension program designed for 1930s America.
At last week's Senate hearings on Social Security, the Democrats merely spewed venom at Bush's plan to allow American workers the financial freedom to own and control their own personal-retirement accounts.
It is almost as if the Senate Democrats — and some feckless Republicans, too — have a hyper-allergic reaction to the notion of letting workers build up private wealth and personal ownership. A cynic might say that they are so wedded to preserving the welfare state that they want Americans to be dependent on government, even if it means they will be worse off financially.
The Democrats have always described themselves as the party of the working class, and the party that protects the interests of minorities. Yet the greatest beneficiaries of personal accounts for Social Security are precisely lower- and middle-income workers. That was the point that the late Sen. Daniel Patrick Moynihan made repeatedly about the advantages of personal accounts. He insisted that personal accounts give the doorman the same chance to to build up private wealth and get rich that the people living in the penthouse suite enjoy.
Study after study has demonstrated that black and Latino workers, because they start working at earlier ages and because they have lower life expectancies than whites, get the worst rate of return from Social Security. For black men, whose life expectancy is actually slightly below the Social Security normal retirement age, the rate of return on Social Security is negative. Where is the justice and fairness in that?
The main attack against personal accounts from the congressional Democrats is that they are "too risky." But President Bush's plan for personal accounts is optional for every worker. Those who believe that personal accounts are "too risky" are welcome to stay under conventional Social Security. Bush simply gives all Americans the right to decide for themselves. The left still says no. So much for the Democrats being the "pro choice" party.
Democrats' Berlin Wall of opposition to any Social Security plan with even a whiff of private ownership makes it unlikely that Bush succeed with his reform this year. But reformers should not despair.
By standing by his principles, while showing a willingness to compromise, Bush has at the very least laid the groundwork for future victory. Today's Washington Democrats, meanwhile, have exposed themselves as reactionary obstructionists, completely devoid of any ideas of their own.
Bush deserves praise for being the first president in modern history to have the political courage to try to avert a tsunami of red ink in Social Security over the next 50 years. That is what the voters will ultimately remember about this political tug of war. The president and reform-minded Republicans may not win this first battle, but they are winning the war.
Stay the course.
Stephen Moore is president of the Free Enterprise Fund and a senior fellow at the Cato Institute. |
