The Corner

A Grim Day For Social Security Reformers

The Washington Post says Bush’s plan is sinking in the polls, having already said that Senate Democrats are an immovable wall of opposition. David Brooks comes close to saying the fight is over. Andrew Ferguson seconds the proposition. I think this is all premature, for reasons that overlap a lot with Byron York’s. There are, however, reasonable points made in all of these analyses.

I just wanted to suggest why Ferguson’s closing thought, an argument that I believe Robert Samuelson has also made recently, may be wrong. Here’s Ferguson: “As a way of disentangling individuals from the welfare state, Bush’s idea has serious flaws. The reasoning goes like this: On the one hand, citizens are smart and responsible enough to control their own retirement funds, which is why they deserve private accounts. On the other hand, the investments allowed for the private accounts, and the pace at which an account-holder can withdraw those ‘private’ funds, will be strictly controlled by the government — because, presumably, citizens aren’t smart and responsible enough to control their own retirement funds. Indeed, Bush’s plan may very well flood the securities markets with investment money that is strictly regulated, placing vast chunks of those markets under Washington’s control. This is hardly the way to strike a blow at the welfare state, as Bush’s Republican allies are slowly realizing.”

I think this is mistaken because, first of all, the accounts would create a constituency that would both resist restrictions that limited the account-holders returns and would demand a reduction in existing restrictions that limited returns. So the problem would tend to diminish over time, and there would be an inbuilt check on the danger of politicization. Second, it’s worth noting that most of the restrictions being talked about are similar to those in 401(k) plans. Control was limited from the start–people could pick a few funds, alter their allocations a few times a year, etc. The regulation of their investment didn’t cause huge problems, and loosened over time.

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg View, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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