George W. Bush has made a politically courageous move by grasping "the third rail" of American politics -- Social Security reform.
He has proposed privatizing part of Social Security. It's not easy making it an important plank in a presidential campaign platform, especially when the issue has been considered a political death warrant. And it's not easy advocating investing any Social Security money in the market when the stock market has declined this year in a tumult of volatile trading, especially on April 14 when the Nasdaq composite fell 9.67%.
So what about Al Gore's position? Mr. Gore calls Mr. Bush's plan "stock market roulette" and a threat to the Social Security program. He treats the word privatization as if it is radioactive and appropriate only to mock and belittle. He thinks privatization is pseudoeconomics.
His contempt is not helpful to serious debate of an important issue. One reason for the depth of Social Security's problems is because political leaders have been afraid of the political repercussions of taking a strong stance. So the issue keeps getting pushed off and the problems grow.
President Clinton attempted to bring the issue to light and offered some interesting suggestions for investing part of Social Security, although he unfortunately would have had the government invest the money instead of providing individual investment accounts. But whether because of the flagging of his term in office or the fatigue from scandals, his proposals have disappeared in the midst of this year's presidential campaign.
Mr. Gore could pick up the administration's proposal where Mr. Clinton left it. But instead, Mr. Gore contends Social Security needs no reform beyond its existing structure, dating to its creation in the 1930s. Mr. Gore, in fact, has called for raising certain Social Security benefits, even as the system clearly faces insolvency sometime around 2030.
Critics of reform point to recent projections that the robust economy has pushed back the day of reckoning for Social Security. Yes, but it only postpones the inevitable by a few years.
Mr. Gore is pandering to trade union leadership for their support for his presidential candidacy. Union leadership vehemently oppose privatization. It's a hypocritical stand since many public employee union members don't participate in Social Security, having only their fully invested public employee pension system. These same union leaders have lobbied to keep these members out of Social Security, defeating attempts by Congress to bring them into it.
A recent news account of Mr. Bush's privatization proposal referred to it as "an experiment." But pension programs -- whether by corporate, union or public employee sponsors -- have been fully invested in the capital markets for generations now. These invested systems generally have achieved great success in financing and securing retirement benefits.
A large part of the work force has no pension program beyond Social Security's low return. Yet Mr. Gore, the unions and other critics of privatization "are denying over half the people of this country the greatest source of wealth, which is gains in the stock market," according to Sen. Rick Santorum, R-Pa.
Sen. John McCain, R-Ariz., who lost to Mr. Bush in the presidential primaries, has suggested appointing another government commission to study the issue, removing it from politics. That would be a mistake. The public has to be part of the discussion. The best way is in a political campaign. The public in the end has to largely support privatization.
Whenever the capital markets turn down, they have to have the understanding and confidence in investing not to sour on privatization and call for return to the government-run system.
The idea that individuals aren't financially intelligent or sophisticated enough to manage the money is a canard. The program can offer low-risk options. In any case, you hire investment experts. As Gary Pines, consultant at Towers Perrin, Chicago, has put it, you hire a plumber or an auto mechanic or now a money manager.
The Bush plan doesn't go far enough. It sets up individual accounts, allowing individuals to invest a small part of their Social Security taxes. But the entire system should be privatized.
In the context of the critical reaction of most Democrats and many Republicans to investing some of the money, however, his proposal may be the best that could be done for now. If it is enacted, it could serve as a foot in the door to foster privatization of more of the system.