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Jewish World Review Feb. 9, 1999/23 Shevat, 5759
Paul Greenberg
The social security game
(JWR) --- (http://www.jewishworldreview.com) CHARLES PONZI LIVED TOO SOON. Imagine what fun that confidence man could have had with
a Ponzi scheme like Social Security, which depends on future investors to pay off
current debts. Not being the federal government, Ponzi eventually ran out of investors.
Which is the same problem facing Social Security down the road -- unless it makes some
changes, a smaller generation of earners will be called on to support a larger generation
of retirees.
What, Bill Clinton worry? The president points to a growing federal surplus and says it'll
take care of everything. All we have to do is save it. Start a private pension plan here,
some special savings accounts there, pay down the federal debt over yonder, and all will
be well. No fuss, no muss, no sacrifice. All gravy. For some reason, the president's State
of the Union patter about Social Security brought to mind the guys on city sidewalks who
run three-card monte games.
What with all the presidential card-shuffling, nobody is supposed to notice that the budget
surplus is the Social Security surplus. Last year, Social Security took in an
estimated $484 billion and expended some $382 billion. The problem with Social Security
is that, as the baby boomers retire, there won't be as many of them to contribute to that
surplus. Instead, they'll need to be supported by the rest of us.
It is only by increasing the productivity of the next generation's workers that Social
Security can be saved for the future. One way to do that would be to ease their tax
burden, but a tax cut for all Americans is anathema to this administration. Its
big-government reflexes have always been stronger than its grasp of the economic
realities. So it balks at what may be the surest way to promote economic growth and
really save Social Security: the Republicans' 10 percent tax cut for all.
Before everybody gets carried away, let it be noted that last year's total surplus ($70
billion) was only part of the surplus ($100 billion) that Social Security collected from all
of us. Yet when Bill Clinton proposes to spend `only'' 40 percent of the budget surplus,
we're all supposed to cheer because our president is "saving'' Social Security. P.T.
Barnum had it right about one being born every minute.
If those saddled with these payroll taxes were allowed to keep more of their paycheck,
they could invest it in savings for their own retirement. Or would you rather have a panel
of experts save that money for you? And pick out your stocks and bonds, too?
Some mighty brainy people -- like the Federal Reserve's Alan Greenspan -- are leery of
the government's buying a vast portfolio of stocks to buy, sell, manage and manipulate
for the rest of us. Mr. Greenspan's voice is not one to dismiss. He's a combination guru,
oracle and fine public servant.
But did it strike anyone else as strange that the head of the Federal Reserve System
should oppose creating a system to invest a portion of Americans' Social Security taxes?
After all, isn't the Fed, which manages the entire national currency, itself a public-private
bureaucracy? And, despite the pressures, hasn't it managed to remain independent,
insulated from politics?
The creation of the Federal Reserve System inspired a lot of doubts back in 1913, too. It
sounded like a dangerous, revolutionary idea to a lot of Americans then. There's a
reason this frontier society was just about the last of the industrialized nations to establish
a central bank; we don't much cotton to powerful bureaucracies. And now even the
head of our most powerful one, the Fed, warns against creating one. How American.
But if the Federal Reserve system worked out, why not an independent, federal,
public-private Pension Board that would manage some of our savings?
Then again, just what would this new bureaucracy invest? The surplus that the president
and Congress talk about is an illusion. If Congress put the Social Security budget into a
separate account, it would be clearer that the federal government still runs a deficit. Or
would that kind of candor be too much to expect of government?
Here's the clearest, best, least controversial part of the president's plan: Use the Social
Security surplus to retire the national debt. That's one way to insure that the system can
borrow the money to pay future beneficiaries. But can anyone be sure this
administration, or future ones, won't just spend the money instead? Look at all those new
programs the president proposed in his State of the Union address.
Yes, this president's proposal remains fuzzy -- but the Republicans' response may be
even fuzzier. Whatever happened to the party that produced the Contract With
America? Love it or loathe it, that platform had traction -- and responsibility. It told
Americans what we could expect from one of our political parties, and the GOP
delivered.
Now neither party can muster the political courage to come right out and say that saving
Social Security might involve some actual sacrifice on the part of the voters -- like
retiring a little later or paying a little higher premium. That would be actuarially sound but
politically risky. And unspeakably responsible.
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