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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.
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