By Taylor Armerding
Staff writer
Everybody, quick, cash in your 401(k) retirement accounts. Don't even think about opening an IRA. Are you crazy? Don't you realize the stock market is far too risky? In fact, it would probably be best just to leave the country entirely, since the health of the stock market is linked to that of the American economy. So if the market is too risky for your assets, well then, the American economy must be too risky as well. Head for Canada. Head for Mexico. Anywhere but here.
That is the absurd logic that proceeds from the U.S. Senate minority leader, Democrat Harry Reid of Nevada, in response to President Bush's proposal to reform Social Security.
Reid says Bush's proposal to let younger workers � and only those who want to � divert some of the Social Security taxes they pay into their own private investment accounts would turn that program from a guaranteed retirement safety net into a "guaranteed gamble."
I guess Reid ought to know about gambling, given that he represents Las Vegas, where I have personally witnessed hundreds of American retirees giving away some of that safety net to the slot machines.
But that, so far, seems to be the best scare tactic the Dems can muster. Bush wants to allow you to control some of your own money. Be afraid. Be very afraid.
I swear, the Democrats should just switch mascots � replace the donkey with the Cowardly Lion. It's not just that they want to help the helpless. They want to force all of us to think we're helpless � that we can't be allowed to choose to manage our own money, or decide what kind of risks we want to take with it.
As if keeping things the way they are doesn't involve risk. In spite of soothing reassurances from Reid and company that Social Security is sound, that there are billions piling up in Al Gore's lockbox, that there won't even be a problem, let alone a crisis, until 40 or more years from now, Democrats more sensible and sober than Reid have called it a looming crisis. Among them was the late Daniel Patrick Moynihan, former U.S. senator from New York, who issued his warning in 1998.
Moynihan's proposed solution was to raise taxes and cut benefits, but even he wanted to encourage private savings accounts as well.
The risks of the current system ought to be clear by now:
r When it began, there were 16 workers paying into the system for every retiree. Now there are a bit more than three, and the number is heading down to two. Meanwhile, people are living longer, and therefore collecting longer.
r When it began, the maximum Social Security tax was $60. Now it is $11,000 � an 18,300 percent increase. How's that for inflation?
r There is no lockbox with a Social Security trust fund in it. Government has borrowed the entire surplus to finance other programs. As President Clinton (a Democrat) put it, the so-called trust fund amounts to "claims on the Treasury," not an actual asset.
r Social Security benefits are not guaranteed. The Supreme Court has already ruled as much.
In the face of this, do Bush's opponents really want to say that since the crisis is decades away, Bush is being alarmist? Most of them admit that without significant structural changes, or major tax increases and benefit cuts, Social Security will take in enough to pay only about 73 percent of promised benefits starting in 2042. As if that's a good thing.
Does that mean they would endorse a 27 percent cut in their benefits now? Or is that just OK for their kids?
Sure, there are so-called "transition costs" to allowing younger workers to put some of their taxes into their own accounts � as much as $2 trillion by some estimates. "How is the president going to pay for that?" his critics ask. But the cost of waiting and doing essentially nothing will leave a gap in the $12 trillion range. And we all know how that will get paid � with crushing tax increases. Can you say "generational warfare?"
There are risks in the market, of course, but there has never been a 20-year period that the stock market lost value. Indeed, its average rate of return has been better than 6 percent annually, compared to less than 2 percent for Social Security. And even if the market is in a trough when some people retire, it is not as though they are going to take out all their money at once.
Indeed, I think the greatest fear Dems have is not that elders will return to poverty, but that more of them actually might be able to lift themselves out of it over their working lifetimes. Democrats need poor people who think only government will save them, and they need them to stay poor.
That is not some right-wing insult. Former Democratic U.S. Sen. Bob Kerrey recalls Moynihan telling him that the reason Democrats are so afraid of Social Security reform is because it might make people wealthy, "and they worry that wealth will turn Democrats into Republicans."
That, I suspect, is what scares Harry Reid more than anything.
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