The coming war over Social Security

Published January 5, 2005 3:18PM (EST)

Fortunately, it looks like the Democratic Party is starting to circle the wagons and get serious about battling the Bush administration's plan to eviscerate Social Security in the name of a mythological crisis, and in the service of the private investment industry. Social Security may well be in need of reform, but as Ronald Brownstein reports in the L.A. Times, some key Dems are coming to their senses about making private investment accounts a fundamental part of it.

"Two groups of prominent Democratic centrists plan to oppose the centerpiece of President Bush's proposal to restructure Social Security, potentially dimming administration hopes of building bipartisan support for its top domestic priority. The Democratic Leadership Council, the party's leading centrist organization, and Third Way, a new group working with moderate Senate Democrats, expect to issue statements soon opposing Bush's push to divert part of the Social Security payroll tax into accounts that individuals could invest in the stock market, officials of the groups say.

"The opposition is significant because both groups have aggressively argued that Democrats should not flatly resist changes to Social Security. Also, in the past some of the leading officials associated with the Democratic Leadership Council have backed the type of private investment accounts Bush is promoting."

In addition to the problem of rising partisan rancor on Capitol Hill, there's the rather gloomy stock market itself getting in the way of the idea.

"Also dampening Democratic interest in Bush's proposal has been the stock market's decline since 2000, which to many has underscored the risks of increasing retirees' dependence on investment accounts.

"'I think carve-out accounts are a very difficult way to start a reform,' DLC founder Al From told the L.A. Times. 'There are too many people afraid of what will happen in the market.'"

And with good reason. We all remember Enron and WorldCom, and there's plenty more where that came from. Take the latest example, Krispy Kreme, of gooey-warm doughnut fame. The Wall Street sweetheart went sour when the low-carb craze swept the land. Apparently the company also deep-fried the books.

So what would be left for Grandma and Grandpa to live on if they'd bet their retirement fund on a big box of Krispy Kreme shares? Here's a hint: It's in the center of the doughnut.

By Mark Follman

Mark Follman is Salon's deputy news editor. Read his other articles here.

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