Opinion Editorial | |
| Wednesday, December 22, 1999 | |
Republican Candidates Debate Social Security
|
While the press is obsessed with handicapping the horse race element of the presidential contest, and promoting its own special interest agenda -- campaign finance reform -- there is nevertheless real debate going on about important issues, although unreported. One of the more interesting debates is going on between Republicans Gary Bauer and Steve Forbes over the future of Social Security.
Democrats traditionally are thought of as the die-hard defenders of Social Security in its current form. Going back at least to the Johnson-Goldwater race in 1964, every time a Republican candidate has suggested making Social Security voluntary, he has been savagely attacked by his Democratic opponent for wanting to take food out of the mouths of the elderly. This demagoguery has made it impossible to make any sort of rational reforms to Social Security, even though all experts agree that the system cannot continue for much longer without fundamental changes.
A new report from the Federal Reserve Bank of San Francisco points out why change is needed. According to the study, the real rate of return on Social Security contributions is now less than 2 percent. By contrast, the real return on U.S. Treasury bonds is about 3.5 percent. That means if workers simply invested their contributions in bonds, their retirement benefits would be sharply higher than what they will get from Social Security.
Furthermore, the study notes that the system is unsustainable. To maintain longterm solvency, Social Security benefits must either be cut 25 percent or the tax rate will have to rise by almost 40 percent, from 10.7 percent to 14.6 percent. Either action will halve Social Security's rate of return to just 1 percent.
For these reasons, there is a growing consensus among experts that some sort of privatization of Social Security is needed. Some like Forbes would go for almost total privatization, others would go only part way. But other than those who make their living scaring retirees with lies about how their benefits are going to be taken away, almost no one is opposed to some degree of privatization on principle.
Interestingly, one of those few is Gary Bauer, who has decided that his ticket to the Republican nomination is to attack privatization and defend the status quo. For example, on December 6, Bauer charged, "The Forbes plan is a too good to be true get rich scheme that promises younger Americans millions while jeopardizing current benefits."
This is complete nonsense and it is to his discredit that Bauer, for whom I once worked, would make such a scurrilous charge. He seems to have been put up to it by his economic adviser John Mueller, who makes much of his living writing studies defending the status quo for the National Committee to Preserve Social Security and Medicare. This last is an organization that continually frightens the elderly with irresponsible warnings about how their benefits are going to be taken away, when it knows full well that no such thing is being proposed by anyone.
Mueller, who once worked for Jack Kemp (as did I), even sold Kemp this same bill of goods. In 1987, Kemp attacked former Delaware Governor Pete Dupont, a rival for the 1988 Republican presidential nomination, on exactly the same grounds that Bauer now attacks Forbes. It didn't work then and it won't work now, because not only is the argument substantively wrong, it is politically mistaken. At least in Republican primaries, voters know better.
In a new study for the Cato Institute, Social Security expert Peter Ferrara thoroughly demolishes the Mueller Social Security argument. I strongly urge Bauer to read it before he says anything more about Social Security.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, December 22, 1999.
For Cato study http://www.cato.org/pubs/ssps/ssp-18es.html
For Federal Reserve study http://www.sf.frb.org/econrsch/wklyltr/wklyltr99/el99-34.html
The National Center for Policy Analysis is a public policy research
institute founded in 1983 and internationally known for its studies on public policy issues.
The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C.
Julie Hillrichs, Dallas, TX 972-386-6272 Sean Tuffnell, Dallas, TX 972-386-6272 Joan Kirby, Washington, DC 202-220-3082 Internet: http://www.ncpa.org Home | Support Us | All Issues | Social Security Debate Central | Contact Us |