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Jewish World Review May 22, 2000 / 17 Iyar, 5760

George Will

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Consumer Reports


AlGore the Hysteric -- AL GORE thinks it is risky. The antecedent of the pronoun "it" could be anything (school choice, tax cuts, entitlement reforms, the internal combustion engine, repeal of the designated hitter rule) that George W. Bush favors. But the risky thing currently alarming Gore, a professional hysteric, is Bush's proposal to allow Americans to invest a small portion of their payroll taxes in personal retirement accounts.

The biggest risk is in doing nothing--neither raising Social Security taxes nor cutting benefits nor causing, as Bush proposes, retirement funds to grow faster. The Social Security Administration says doing nothing will force a 25 percent to 33 percent reduction of benefits for 150 million people currently under 40.

Some critics of Bush's plan worry that individuals might invest retirement funds recklessly, assuming that government would be the insurer of last resort--that if there were a long cycle of declining share prices, government would at least cover their losses. But under Bush's plan, investors would choose not individual stocks but a few "steady, reliable funds."

The most risk-free way (free of economic risk; political risk is another matter) to start fixing Social Security would be to raise the retirement age. If in 1935, when Social Security was enacted, the retirement age had been indexed to life expectancy, the retirement age today would be about 73.

Bush's basic approach is supported by many Democrats, including Sen. Bob Kerrey of Nebraska, who says, "It turns capitalism in a direction that is very defensible." He notes that liberals should know by now that inheritance taxes are ineffective at doing what something like the Bush approach to retirement security would do--help narrow the gap between rich and poor.

Allowing people with modest resources to attempt to multiply those resources in the stock market is the best way to open broader access to affluence. But although about half of American households now own stock, Gore portrays the stock market as irrational, like gambling (last week he referred to "stock market roulette" and "rolling the dice"), and riddled with fraud. Pandering to students at the Fordham Business School in Manhattan, he said:

"Tens of millions of investors who have not gone through the Fordham Business School, who have not had an opportunity to gain some basic knowledge to protect themselves against fraud, would be placed in a situation where a lot of financial shenanigans could take place, where they are losing their investments because they are not equipped in the way that sophisticated investors are."

Is Gore saying tens of millions of Americans are invincibly ignorant when making choices about their financial security? Or that they should be shut out of today's wealth-creation because the government cannot police fraud in the stock market? Is it market volatility that supposedly makes Bush's proposal unacceptably risky? Daniel Mitchell of the Heritage Foundation said personal retirement accounts are long-term investments that can withstand periodic volatility: "Over the past 70 years, a period that includes both the Great Depression of the 1930s and the one-day decline of 20 percent in 1987, annual returns in the stock market have averaged more than 10 percent (more than 7 percent after adjusting for inflation)." This is far better than you do under Social Security in terms of taxes paid and benefits received.

Gore warns that Bush's proposed personal retirement accounts would divide Americans into winners and losers. Actually, the basic division would be between winners and even bigger winners. Mitchell says that looking at the best and worst 46-year periods (the span of an average person's working life) in market history, workers' personal retirement accounts in the best period would have done almost twice as well as those in the worst, but those in the worst would have done much better than by relying on Social Security alone.

Congress does not rely on it. Under the Thrift Savings Plan, members of Congress, and other federal workers, can invest up to 10 percent of their salary annually in one of three retirement funds--one stock-based, one based on corporate bonds, one based on government bonds. Over the past 10 years the average return from the stock-based fund has been 18 percent. Last year's return was 20.95 percent.

The 1988 legislation creating this plan was co-sponsored by Gore.

Today, in his infinite condescension toward the American public, he thinks that plans of the sort Congress created for itself and other federal workers, and that Bush proposes for all Americans, are just too complex ("risky") for "tens of millions" of Americans.

Comment on JWR contributor George Will's column by clicking here.


05/15/00: Majestic Avenue
05/11/00: Just How Irrational Is the Exuberance?
05/08/00: Home-Run Glut
05/04/00: A Lesson Plan for Gore
05/01/00: The Hijacking of the Primaries
04/28/00: The Raid in Little Havana
04/24/00: Tinkering Again
04/17/00: A Judgment Against Hate
04/13/00: Tech- Stock Joy Ride
04/10/00: What the bobos are buying
04/06/00: A must-read horror book
04/03/00: 'Improving' the Bill of Rights
03/30/00: Sleaze, The Sequel
03/27/00: How new 'rights' will destroy freedom
03/23/00: Death and the Liveliest Writing
03/20/00: Powell is Dubyah's best bet
03/16/00: Free to Be Politically Intense
03/13/00: Runnin', Gunnin' and Gambling
03/09/00: And Now Back to Republican Business
03/06/00: As the Clock Runs Out on Bradley
03/02/00: Island of Equal Protection
02/28/00: . . . The Right Response
02/24/00: Federal Swelling
02/22/00: Greenspan Tweaks
02/17/00: Crucial Carolina (and Montana and . . .)
02/10/00: McCain's Distortions
02/10/00: The Disciplining of Austria
02/07/00: Free to Speak, Free to Give
02/02/00: Conservatives in a Changing Market
01/31/00: America's true unity day
01/27/00: For the Voter Who Can't Be Bothered
01/25/00: The FBI and the golden age of child pornography
01/20/00: Scruples and Science
01/18/00: Bradley: Better for What Ails Us
01/13/00: O'Brian Rules the Waves
01/10/00: Patron of the boom
01/06/00: In Cactus Jack's Footsteps
01/03/00: The long year
12/31/99: A Stark Perspective On a Radical Century
12/20/99: Soldiers' Snapshots of the Hell They Created
12/16/99: Star-Crossed Banner
12/13/99: Hubert Humphrey Wannabe
12/09/99: Stupidity in Seattle
12/06/99: Bradley's most important vote
12/03/99: Boys will be boys --- or you can always drug 'em
12/01/99: Confidence in the Gore Camp
11/29/99: Busing's End
11/22/99: When We Enjoyed Politics
11/18/99: Ever the Global Gloomster
11/15/99: The Politics of Sanctimony
11/10/99: Risks of Restraining
11/08/99: Willie Brown Besieged
11/04/99: One-House Town
11/01/99: Crack and Cant
10/28/99: Tax Break for the Yachting Class
10/25/99: Ready for The Big Leagues?
10/21/99: Where honor and responsibility still exist
10/18/99: Is Free Speech Only for the Media?
10/14/99: A Beguiling Amateur
10/11/99: Money in Politics: Where's the Problem?
10/08/99: Soft Thinking On Soft Money

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