WASHINGTON -- The President is out on the hustings. Yes, he remains on the campaign trail. He is supposed to be taking a break in Crawford, Texas, but his schedule shows him flying out across the country almost daily, campaigning. What is he campaigning for? The answer is Social Security reform. Here in Washington the press has if anything understated how much George W. Bush cares about this issue. One might well ask why he cares so ardently about it. Surely it is not as glamorous as defeating tyrants abroad, a task he has well in hand. Yet only the author of Social Security, Franklin Roosevelt, has invested so much intensity in securing the future of the nation's retirees. GWB is an unusual Republican.
I say he is unusual because he has such an ardor for politics. Most Republicans do not. In fact, a major difference between Democrats and Republicans is to be found in their political libidos. The Democrat has the political libido of a nymphomaniac. The Democrat politicizes practically everything and lusts for it madly. The Republican has the political libido of a eunuch. That is why today Social Security reform is in trouble. Only this Republican President and a handful of fellow Republicans are truly engaged in the fight. Had the Democrats decided to reform Social Security, the process would be well on its way. Back in the 1990s, when it was popular with both Democrats and Republicans to recognize that the system needed reform, action toward reform was heating up. President Clinton had put together a bi-partisan group to reform the system. But other matters overtook him, and so now it has fallen to Republicans to push for reform.
That means the reform movement is in trouble. The Republican political libido is part of the problem as is the Democrats' political libido. The Republicans do not have the President's ardor. The Democrats see a larger political advantage to deny the Republicans a victory on Social Security and are opposing the President day and night, week in and week out. And there is one other matter. The Democrats of the present, that is to say the left-wing Democrats, have no belief in growth economics. It is growth economics that will preserve the security of the nation's retirees.
The current Social Security system is an unfunded liability. It is without investments to back it up. It is headed toward bankruptcy or toward becoming a tremendous burden on the economy. David Malpass, the chief economist of Bear Stearns and for my money one of the country's sagest economic minds, argues that Social Security reform ought to be selling itself -- it is that desirable. In the April issue of The American Spectator he offers eight reasons. Allow me to pass along four.
With expanded use of personal accounts there will be "less risk, more benefits." Malpass goes on to argue that the insolvency of the present system "creates an immense risk for the young." As for benefits, "the current benefit system offers an assumed return of 3% per year, but that is completely dependent on the beneficiary living long enough to collect." Whereupon Malpass cites "Jeremy Siegel, one of the world's experts on long-term equity performance," who "forecasts real equity returns (before inflation) at 6% per year over the next 44 years....Personal accounts clearly offer the likelihood of more benefits than the current system, without the risk of the government voting them away."
Another obvious benefit from Social Security reform is job growth. Says Malpass, "The current Social Security system imposes a gigantic tax on jobs -- 12.4% of pre-tax income including the employer and employee portions." By reducing the tax and allowing workers to invest more of their income, jobs will be created and the economy's growth rate will increase. A third benefit from Social Security reform will be an increase in "fairness" for the "frail or minorities, who tend to die earlier and lose their benefits." Moreover, the present system is "unfair to those who want to work past 62 or start working young, since the benefit formulas...give minimal extra benefit for working more years." Finally, Malpass sees Social Security reform freeing Americans from "dependence on Washington. Retirees now rely on Washington largesse for their checks," which distracts elections from wider issues to questions of Social Security's benefits. "For now, every election has to be first a vote on the size of Social Security payments, then a vote on other issues."
So it is time to get Social Security out of politics and onto an economically sound basis. That is Malpass's message and it ought to be the Republicans' too. It ought to even be the Democrats' message. Yet their political libidos will not allow it. Thus we have this one great campaign being waged by the President. He could benefit from reading the whole of Malpass's argument.
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