Does it sometimes seem that everyone in the country is getting rich off the stock market except you?
Don't you resent, just a little bit, all those federal deductions taken out of your measly paycheck?
And did you read where Social Security may be going broke?
C'mon, wouldn't you like to play in the market with the big guys for a change, and maybe put away a small fortune of your own for retirement?
Well, worry no more, because George W. Bush has a deal for you. It's the safe, inexpensive and virtually risk-free privatization of the nation's social insurance system. Just sign up here and don't look too closely at the fine print.
Since promising giant tax cuts no longer lures voters like it once did, the Republican presidential candidate is promoting a plan to "reform" Social Security by transferring a share of payroll deductions into individual retirement accounts. He says his plan will "save" the great New Deal program, which has lifted millions of elderly and disabled Americans out of poverty, while enhancing the retirement income of future generations. At the same time, he says he'll reduce taxes, increase military spending and balance the budget.
It almost sounds too good to be true. Of course, we don't know exactly how Bush will achieve this economic miracle, because he's not a big guy on the details. Or maybe there's another reason for his reticence: Could Bush's plan possibly be a Trojan horse meant to enrich the financial industry rather than us?
Most conservatives prudently abandoned their campaign to abolish Social Security long ago, though they still hope to get their hands on its revenue stream. Until lately, the right's favorite idea for milking the system has languished on the shelves of libertarian think tanks. Even fervent ideologues understood that despite (or more probably, because of) the program's "socialistic" redistribution of resources, it remains immensely popular. So popular, in fact, that elected officials of both parties generally refrain from touching Social Security because they fear being fried by the legendary "third rail" of the American political economy.
But the impulse to dismantle liberalism's most enduringly successful achievement has remained strong. And now, after decades of alarmist rhetoric about Social Security's impending insolvency and years of relentlessly rising stock prices, the right perceives a golden opportunity to institute a regressive "reform."
Enter Bush, with his proposal to allow workers to place two percent of their earnings in private accounts rather than the Social Security trust fund. He says there would be no reduction in benefits for older or disabled workers and their families, no increase in Social Security taxes and no raid on the trust fund itself.
The intellectual premises of the Bush plan may be found in studies by prominent conservative economists, most notably Harvard's Martin Feldstein. Unfortunately, the studies of Feldstein and his colleagues have a few devastating flaws, as pointed out by pension experts in a critical report published by the Center for Budget and Policy Priorities.
Omitted from Feldstein's study and Bush's promotional presentation is the huge transition cost -- estimated in the trillions of dollars -- that would have to be borne by the current generation if substantial numbers of workers opted out of Social Security. Otherwise, the trust fund will be unable to pay the full benefits owed to those who have already contributed during their lifetimes. So expensive would this bailout be that it would consume most if not all of the increased income from private accounts.
That projected bonanza may be largely mythical anyway, and not only because of the transition cost. The Feldstein study claims that administrative expenses for private retirement accounts would be as low as 0.4 percent --but in the United Kingdom, where a similar experiment is underway, those costs have ranged up to six times higher. Small accounts such as those that would be accumulated by most American workers would incur the highest proportional costs, further eroding savings and earnings.
Then there is the unavoidable question of risk. Bush brushes aside the likelihood of a market crash, or even a "correction," wiping out the value of private accounts by promising "safety and soundness standards." (He could always count on personal bailouts from family friends when his own finances went sour, but that's another story.) Such strict regulation would undermine the very freedom Bush proposes to bestow on workers. Nor would it provide any real guarantee against millions of people being defrauded out of their savings by unscrupulous operators.
Such a scandalous mass swindle is what has already happened in England, where ordinary workers have been gypped by crooks and speculators. In this country, Securities and Exchange Commission chairman Arthur Levitt Jr. has already warned that his agency is unable to police the endemic thievery in the financial markets, let alone the banditry that would victimize inexperienced investors in a vastly expanded marketplace.
In short, there is no certainty that private accounts would achieve higher incomes for retirees, and a considerable probability of an eventual government bailout that would make the savings-and-loan disaster seem cheap. The only sure thing is that hundreds of billions of dollars would be channeled from the Social Security Trust Fund into the coffers of investment firms -- which is why those same companies have financed dozens of conferences and position papers promoting this concept, and why they are pouring millions of dollars into the Bush campaign.
The truth is that nobody knows how the stock market or the national economy will perform next week, next year or 10 years from now. Statistics and variables are too easily manipulated to produce answers that serve a particular political agenda. When a candidate like Bush predicts that Social Security will be insolvent decades from now, he relies on a set of figures that probably underestimates future growth and productivity; yet when he promises a burgeoning stock market that will pump up private accounts, he cites diametrically opposite assumptions about those same indicators.
The unprecedented growth of recent years is unlikely to continue without interruption. But if the economy does continue to grow at an average rate of two percent a year or more, the good news is that Social Security will collect sufficient income to protect the elderly and disabled until 2037, according to the most recent data released by the government. To insure the system's financial stability into the second half of the century, adjustments in revenue and benefits will be required, just as they have been since the program was created in 1936.
There is no imminent crisis in funding Social Security, however, and that raises the question of whether we should gamble our collective future on Bush's nebulous scheme.
Before doing so, we might be wise to revisit the old cliche: "If it sounds too good to be true, it is."