Private investment for Social Security?

Question from Republicans: Democratic Senators Pat Moynihan and Bob Kerrey agree with Governor George W. Bush that it's time to strengthen Social Security by allowing workers to control a portion of their own retirement accounts. Why does Vice President Al Gore oppose this commonsense reform?

Jim Nicholson, Republican national chairman: Texas Governor George W. Bush this week offered the boldest reform proposal in years - a plan to strengthen Social Security by letting workers invest a portion of their own payroll taxes in private markets. But, as usual, Al Gore - who should be wearing a sign on his back that says ''Obstacle to Reform'' - opposes the plan, calling it (what else?) ''risky.''

In doing so, Gore isn't just opposing Gov. Bush. He's also opposing senior Democrats like Senators Pat Moynihan and Bob Kerrey - who have studied Social Security for years - and a slew of Nobel Prize-winning economists.

But, more curiously, Gore is opposing himself. On Jan. 27, 1999, speaking at a White House-sponsored round table on the issue, Gore said: ''Over any 10-year period in American history, returns on equities are just significantly higher than these other returns.''

The fact is, Social Security is going to go broke once the Baby Boomers retire. That's why more Boomers believe they'll see a UFO than a Social Security check. So the real risk is to do what Gore is doing: Stand there and do nothing but try to scare people.

Allowing workers the option (no one will be forced to do it) of investing a portion of their own payroll taxes will greatly increase their returns, and will let them retire with a nest egg they can spend, invest or even pass on to the next generation.

Today, a couple can look forward to a measly 2 percent return on their Social Security payments. But over the last 75 years, real returns on stocks averaged more than 7 percent - three and a half times as great. In addition, investments harness what's been called ''the magic of compound interest.'' Currently, Social Security recipients are denied that boost.

More than half of America's households are already investors as well as workers. Why not extend the promise of prosperity to everybody else, Joe? Are you afraid they will become Republicans?

Joe Andrew, Democratic national chairman: George W. Bush's proposal privatizes Social Security, endangering future generations of Social Security recipients. Bush himself admits that his goal is privatizing the whole system. Bush's plan strikes at the very heart of the principle upon which Social Security was founded - the guarantee of benefits.

Since it was created, Social Security has vastly reduced poverty rates among senior citizens, allowed seniors to live with dignity and independence, and lifted the burden from family members. Social Security is a moral obligation of one generation for another - not just a financial arrangement. Such a promise is too important to be risked in the stock market.

But it's not just the vast majority of Democrats that agree on the folly of Bush's proposal. Just a few months ago, Republican John McCain criticized Bush's almost two trillion dollar tax plan for spending the entire surplus on tax cuts, jeopardizing the future of Social Security. In McCain's words, ''Bush's proposal has not one new penny for Social Security.'' In fact the transition costs of Bush's plan could cost upwards of $1 trillion of the projected surplus, preventing that money from shoring up the trust fund.

A quick look at history demonstrates the fault of Bush's plan. On Oct. 19, 1987, the stock market fell nearly 23 percent in the largest point drop in Wall Street's history. Had Bush's plan been in place, workers retiring on October 19 would have received far less of their investments than a colleague with the identical portfolio retiring the day before. Both the power and the pitfalls of the market system lie in its risks, and Bush cannot guarantee that workers will get the same benefits as under the current system.

With Bush's plan, a stock market downturn would mean one of three things: Either Social Security recipients get fewer benefits, the government is forced into a massive federal bailout (endangering fiscal stability) or the age limit must be raised, postponing Social Security's benefits. None of these options is good enough for Americans who have worked hard and deserve a rock solid guarantee when they retire.


Use the comment form below to begin a discussion about this content.

Sign in to comment