5.31.00
A Successful Launch

5.30.00
Testing Time

5.26.00
How Safe Are You?

5.25.00
Separated at Birth

5.24.00
Mergerphobia

5.23.00
Dealing with Daschle

5.22.00
Unequal Comment

5.19.00
Learning English

5.18.00
Helen Thomas, Liberal

5.16.00
Dakota Man

5.15.00
Quite Contrary

5/31/00 5:15 p.m.
A Successful Launch
GWB's Social Security suggestion has been taken as positively as could be hoped.

From National Review June 19, 2000

Today's bulletin is taken from the upcoming issue of the print magazine, cover date June 19.

he initial reaction to George W. Bush's suggestion that workers be allowed to invest some of their Social Security taxes has been as positive as could reasonably be hoped. Support for the idea is holding steady in the polls, and most observers agree that the proposal is helping Bush. The press coverage, which could have been terrible, has been merely mediocre.

Democrats are throwing every argument and epithet they can find at Bush's idea. Al Gore calls it "stock-market roulette." The remark reeks of an ignorant distrust of financial markets; investors work with risks inherent in enterprise, while gamblers invent risks merely for the sport of it. It also implies a disconcerting pessimism about America's economic future. Besides, nobody would have to invest in individual stocks under Bush's proposal. Workers could buy low-risk index funds or government bonds, or they could stay in the current system and not invest at all.

Others have advanced more sophisticated arguments against Bush, but they are not strong ones. Economist Paul Krugman writes that we are at or near a market peak, so that Bush's plan would "encourage workers to buy stocks at exactly the wrong time." Wall Street Journal editor Robert Bartley made quick work of this: "Under no Social Security proposal would workers go borrow 2 percent of their lifetime income and plunge it into stocks today. Rather, they will invest 2 percent of each paycheck over their careers. This is dollar-cost averaging: You don't try to guess market timing, which even pros usually get wrong. Instead, you invest the same amount of money every month (or whatever); you will automatically buy more stocks when they're cheap and fewer stocks when they're dear." For the same reason, there is no cause to worry that a sudden influx of money will reduce returns on stocks.

Defenders of the current system say that it is unfair to compare it to private investments, since the program redistributes money to the poor while private investments do not. But this point actually helps the case for reform. Even the beneficiaries of the program's redistribution — the low-wage, single-earner couples who get the best deal from Social Security — earn a lower return than they would through private investment. They will profit from reform, even if they have to pay a fee to whoever manages their accounts (another objection made by Gore aides).

One Democrat who sees through these phony arguments against reform is Daniel Patrick Moynihan, the senator from New York. In a New York Times op-ed, he reminds us that the payroll tax was hiked by two points in the Carter era to save Social Security. By making some relatively modest spending cuts — Moynihan offers some suggestions, but the details are negotiable — the program could be put in balance without those extra two points. Those two points are what Bush would let workers invest.

Bush's proposal would be, in one sense, a step back for the welfare state. But as Moynihan notes, it would also advance its egalitarian aims: "In 1944 the British came up with the slogan of 'cradle to grave' protection. We propose something beyond: an estate! For doormen, as well as those living in the duplexes above." Moynihan, who was once President Nixon's domestic-policy adviser, is retiring from the Senate next year. Perhaps President Bush could bring him back to serve as a special assistant on Social Security reform?

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