WASHINGTON, Dec. 13 (UPI) -- Has the idea of privatization of Social Security become a mainstream idea or is it still the bridge to the third rail of American politics? UPI National Political Analysts Peter Roff, a conservative, and Jim Chapin, a liberal, weigh in on this critical question.
Chapin: Even a Stacked Commission Can't Agree To A Solution
Having picked a commission with a set of guidelines that guaranteed "consensus," President Bush now has received a three-part proposal back, none of which generates any momentum for any desired solution.
There were multiple problems with this commission from the beginning -- by picking its members on the basis of an already agreed upon set of positions, he guaranteed that those who didn't agree with those positions wouldn't give much of a hearing to its ideas.
Then, he placed three mutually restrictive demands on the commission -- don't touch present beneficiaries, don't increase revenues, and support private accounts.
The dirty little secret that Bush avoided in his campaign was the notorious question of "transition costs," which would be the result of reducing present revenues in order to fund private accounts.
Although the commission itself didn't want to admit it, it turns out that, given the assumptions about future economic growth under which they worked, these costs are $2 trillion to $3 trillion.
And Bush's tax cuts, the recession and the expenditures associated with Sept. 11 have made sure that no such money was available.
The good news, which is not acknowledged by the commission and by most of the media, is that the assumptions under which there will be a shortfall in revenues in 2038 (assuming that anyone has the slightest idea of what the economy would look like in 37 years -- how good would a prediction about this year made in 1964 have been?) are almost certainly false.
These assumptions presume a growth rate of between one-quarter and one-half of that of the last century while the stock market, apparently unaffected by this radical change downward in the economy, will ride forward at the same level as it did in the last century.
If you believe that, or believe that America's most successful program should be ripped apart on such assumptions, I would be glad to sell you the Brooklyn Bridge, or Enron. Come to think of it, the Bush administration already bought into the latter.
As it is, the only way that one could carry out these plans is if you can create a few trillion dollars with a wave of the hand. The Bush administration has already shown its ability to make a few trillion dollar surplus vanish with a wave of the hand, but one suspects that creation of this money will be harder than making it disappear.
As it is, although Bush promises to take up this issue again in the State of the Union address, it is hard to see why any Republican running for re-election in 2002 would want to talk about it.
The first proposal of the three, the "lite version" that simply offers a voluntary option to add 1 percent to one's own FICA, to invest in the market, is the only one that has any chance to pass. Many Democrats have already endorsed such a plan.
The other two proposals, which reduce guaranteed benefits in return for "greater returns from the stock market," have the problem of crossing water that is, on the average, three feet deep. On the average, it may well be that more people will make more money, but lots of people will be losing all their money. Lots of people drown in nine-foot holes while others are crossing happily at the one-foot level.
What does the government do with those people? Who knows?
Luckily, it is unlikely that we will ever have to find out.
Roff: Free the seniors
The reason that Social Security is the third rail of American politics has little to do with policy and much to do with fear and demagoguery.
For many years, unscrupulous politicians have manipulated the anxieties of seniors living on fixed retirement, telling them efforts to reform Social Security would mean benefit cuts or ruin, leaving them in the street destitute, or worse, dependent on their children.
As a bloc, seniors represent the largest group in the electorate, making this a politically potent argument. The commission report has, hopefully once and for all, punctured it.
Now on the table are three different options for the president to choose from, each of which includes a personal account component. The idea that every American should be an investor with a stake in their own future and the power to manage their retirement planning has firmly taken hold.
This was not certain when the commission was chosen. The selection of former Sen. Daniel Patrick Moynihan as the co-chairman of the effort was perceived as a signal that meaningful privatization was dead at the start. How wrong the insiders were.
The commission crafted three viable plans for private accounts and left it to the president to choose the final form of reform.
The report itself is like what Social Security will be under a privatization regime: certain standards set and enforced with workers allowed to choose what their private account investments will look like. If you favor rigidity and command-and-control over flexibility and freedom, the commission's recommendations will disappoint.
As scored by the Social Security Administration, as privatization expert Peter Ferrara has written, reform means all workers getting higher retirement benefits overall while, at the same time, reducing the long term financing gap for Social Security.
Most importantly, the privatization proposals mean no change for current retirees or for anyone near retirement, sidestepping the false choice between higher taxes or benefit cuts.
Ownership of personal retirement accounts like the commission has proposed creates real assets for workers and their families. Far too often, poor minority workers die before they reach retirement age, and all their so-called investments in Social Security vanish. With private accounts, their assets would be passed to heirs, not eaten by the government.
Poor workers will benefit most from the higher rate of return private accounts provide, losing little to nothing in the way of benefits later and without being forced to pay higher taxes now. It would make them participants in the capital economy, in the long run helping to end the destructive politics of class warfare upon which the current liberal welfare state is based.
This is why so many oppose these reforms. They want people to be dependent on the government for things like retirement income to preserve the public policy status quo and to preserve their political influence. For them, scaring the nation's elderly and keeping them near poverty is not too high a price to pay for power. Reform must happen and end this insidiousness once and for all.
