Yesterday the editors of the Wall Street Journal had a session with Rep. Steny Hoyer (D-Md.), minority whip and leading Democratic spokesman on Social Security. An account in the OpinionJournal Political Diary (subscription-only, but cheap at $3.95 a month) foreshadows what the Dems will say about the program once they stop insisting that absolutely nothing is wrong:
Mr. Hoyer said Democrats will offer their own plan when the time is right, and that the model for compromise will be the deal Ronald Reagan struck in 1983 to raise the retirement age. He further hinted at benefit cuts by noting that the government isn’t obligated to keep paying what it currently pays out. Dropping the Democratic talking points for a few minutes, he also suggested that Social Security should have the “ability to invest” in the stock market. And he declared: “I am for private accounts,” though “as an add-on” to Social Security.
So, after months of denouncing President Bush for proposing future benefit reductions, sweetened by being able to keep all of the gains from one’s own investment account, Democrats are prepared to offer future benefit reductions, sweetened by nothing at all. No wonder they’ve been reluctant to go public with that brainstorm!
Investing the Social Security trust fund in stocks and “adding on” taxpayer-funded private accounts are two of the Clinton Administration’s bad ideas, whose flaws I discussed long ago. In brief, the former would make the U.S. government the country’s largest stockholder, potentially owning $7 trillion in securities at the trust fund’s peak. That sort of government intrusion into the private sector would be unhealthy. Moreover, it would not address Social Security’s long-term demographic dilemma in any meaningful way.
The other element, add-on accounts paid for by other taxpayers, is no more than an income transfer scheme. Its appeal to crypto-socialists is obvious, but one hopes that they won’t fool the rest of us.
I expect to hear many invocations of 1983 as the debate continues, with the aim of convincing the public that higher taxes (only on “the wealthy”, of course) and lower benefits are the “Reaganesque” approach to reform. That isn’t the real history. In 1983 Social Security faced near-term cash flow shortfalls because of imprudent revisions to the benefit formula a few years earlier. All of the changes adopted then were directed toward resolving that problem. Private accounts weren’t on the table, because everyone still regarded Social Security as Washington’s highest-voltage third rail, one that not even Ronald Reagan dared to touch. It’s a pity that our leaders weren’t bolder back then. If they had been, the transition of the system from public liabilities to private assets could have been nearly complete by now. That an opportunity was missed once is not, however, a good reason to spurn it when it comes again.
Comments