Jewish World Review May 23, 2000 /18 Iyar, 5760
Early polls indicate 60 percent of voters support Bush's idea of private savings accounts. The Bush campaign has unearthed evidence that Gore formerly defended investing Social Security money in the stock market, and some nonpartisan economists say that Gore's alternative proposal won't work as advertised.
Though Gore attacks Bush's plan as "stock market roulette," Bush aides on Tuesday gleefully passed out videos of Gore's vigorous January 1999 defense of the safety and financial rewards of investing Social Security taxes in private markets.
At the time, Gore was backing an administration plan -- since dropped -- for government investment in the stock market. But his arguments were strikingly similar to those Bush used this week to promote his plan for private investments.
Gore declared that investing Social Security money in the stock market "comes down on the side of individual choice," could be made safe by restricting the kinds of investments made and would offer "significantly higher returns" than government bonds.
As Bush asserted in announcing his plan in California, Social Security contributors currently earn only 2 percent a year in interest on their money. But since 1926, equity investments have averaged a 7.2-percent gain per year. The difference could mean hundreds of thousands of extra retirement dollars for young workers, Bush said.
Meantime, in an interview, Dan Crippen, director of the nonpartisan Congressional Budget Office, bolstered the logic behind Bush's plan and questioned some Gore claims -- though he is not endorsing either candidate's approach.
Bush asserted that "within two decades there simply won't be enough younger workers to pay the benefits earned by the old. If we do nothing to reform the system, the year 2037 will be the moment of financial collapse.
"The system will be insolvent... requiring either a massive cut in benefits or a massive increase in taxes."
Similarly, Crippen said that entitlements for the elderly -- Social Security, Medicare and long-term care under Medicaid -- now cost $600 billion a year. That translates into 7 percent of the nation's gross domestic product and a third of the federal budget.
In 2030, Crippen said, the costs will double to 14 percent to 15 percent of GDP. To maintain current benefits, the government will have to borrow $600 billion a year, raise taxes to record levels or eliminate all discretionary spending by the federal government, including defense.
Gore's answer to the demographic crunch is to propose fiscal discipline to pay down the $3.4 trillion federal debt by 2011. In the years after that, he proposes to assign the interest saved to the Social Security Trust Fund. That, he said, would keep the retirement system able to pay full benefits until 2050.
But Crippen and some other experts say Gore's method is, in effect, bogus, and based on "double counting" of interest savings.
"It's like if I go to the Price Club and the check-out guy says, `You just saved $50 by shopping here,'" Crippen explained. "If I say,`So, credit the $50 to my credit card,' he'd laugh."
He also questioned whether Gore's spending proposals -- for education, health care and new Medicare benefits -- would permit the budget savings that Gore is projecting.
Among others who attacked the Gore concept when it was proposed last year by President Clinton were Comptroller General David Walker; Sen. Bob Kerrey, D-Neb.; and Sen. Fritz Hollings, D-S.C.
Hollings called it "nothing more than a modern-day Ponzi scheme" and others said that, ultimately, it was based on "saving" Social Security with transfers from general revenues when Social Security taxes stopped being sufficient to cover benefits.
Crippen hastened to add that he could not be sure whether Bush's plan would be better than Gore's since the governor has not revealed key details -- especially whether money earned in private accounts would replace other Social Security benefits.
Crippen said there's a fundamental flaw in most discussion of Social Security -- talk about "solvency" of the Social Security Trust Fund, which he said is "an accounting fiction," not a bank account that can be tapped.
To pay benefits to retirees, the government uses tax money collected from current workers. But beginning in 2013, current taxes won't cover current benefits.
"The right way to think about this is that the economy is the trust fund," Crippen said. "There are two moving parts -- the benefit levels we decide to pay and the economy that supports the system. We can lower benefits or stimulate economic growth or some of both."
Both Gore and Bush propose to help the economy grow by refusing to spend Social Security taxes on any other program, thus lowering government debt and interest rates. But neither candidate has the nerve to talk about any cuts in benefits. And it's still an open question as to whose overall economic plan -- Bush's tax cuts or Gore's "investments" -- will be better for long-term growth.
That's what the election will be
05/18/00: Gore should regroup