CLINTON'S SOCIAL SECURITY SHELL GAME

Several members of Congress have proposed innovative but sensible plans to carve out part of the Social Security payroll tax to create individual investment accounts owned by workers, similar to existing IRAs and 401-K plans. The idea is to replace gradually the unfunded liabilities of the present system with fully funded individual accounts, and increase the rate of return of those accounts through individual investments in stocks and bonds. Sounds like capitalism for the masses, doesn't it? And it is. 

But Congress hesitated in developing these plans, unwilling to go out on a limb until they knew what President Clinton would propose. And in his recent State of the Union Address, Clinton gave them his proposal: a peculiar mix of sleight-of-hand, fascism, and socialism with a populist appeal that does nothing to solve the Social Security problem. It may be Clinton's dumbest idea since Monica Lewinsky. 

The sleight-of-hand is the Clinton version of the old accounting dodge of keeping two sets of books. He proposes using 62 percent of the federal budget surplus for the next 15 years to shore up the Social Security "trust fund". But the surplus already belongs to Social Security, so what he is proposing is to count the same surplus twice. Senator Judd Gregg of New Hampshire, a leading figure in the fight to have Social Security, calls it "one of the most bizarre ideas that I have seen outside of a Lewis Carroll story." 

And we're not taking peanuts here. What Clinton proposes to double count is $2.7 trillion (yes, trillion). Gregg points out that, "We can only accomplish what the President proposes if we allocate $2.7 trillion in new on-budget deficits, appropriating new outlays to Social Security. Some of these outlays from general revenues are astronomically high. More than a trillion dollars annually by 2045!" Who will pay these "astronomical" sums? We will, through higher taxes. 

The second element of Clinton's proposal is investment of a portion of Social Security funds in the stock market. But not by individuals through their own accounts, but by the government itself. Apparently our populist President doesn't trust individuals to invest their own money wisely. 

But direct government investment in the stock market is worse than simply denying individual investment rights. Clinton's plan to invest $700 billion in stocks will make the federal government a controlling factor in the operations of American corporations - a major step toward fascism. Corporations will rise or fall based, not on their success in producing and selling their products in the marketplace, but on whether or not the federal government finds them "acceptable" for investment of Social Security funds. In the measured (though tortured) rhetoric of Federal Reserve Chairman Alan Greenspan, "Even with Herculean efforts, I doubt it would be possible to insulate, over the long run, the trust funds from political pressures." 

The final element of Clinton's Social Security reform really has nothing to do with Social Security: it is instead a new welfare program. He proposes to pay people to set up investment accounts entirely apart from Social Security. Socialism in the guise of asset formation. Who can object? Only we taxpayers, who will be shackled with the additional taxes to fund these handouts. 

So there you have it - Clinton's plan to save Social Security. Part shell game, part fascism, part socialism, and no substantive fix. If he weren't such a master of deceit, one might question his sanity. But his motivation seems clear: make the people happy now, and the future be dammed! 

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"On Opting Out"  Alan Greenspan  Fed. Reserve Board Chmn.  "My own preference is strongly in the direction of moving towards a privately financed system."  Edward H. Crane  Pres., Cato Institute  "Social Security privatization is, nowadays, the single most important step toward a society of liberty. It combines personal freedom with widespread property ownership, and those are the pillars of a free society."

 

OTHER ARTICLES
• THE SOCIAL SECURITY TRUST FUND ACCOMPLISHES NOTHING, Heritage Foundation Backgrounder No. 1256, Feb. 22, '99 by Daniel J. Mitchell, McKenna Senior Fellow in Political Economy in The Thomas A. Roe Institute for Economic Policy Studies
• TAKING SOCIAL SECURITY PRIVATE, Investors Business Daily, Mar. 17, '99, by Aaron Steelman
• A PENNY SAVED IS A PENNY EARNED, Cato Institute, Mar. 11, '99, by Carrie Lips, a Social Security analyst at the Cato Institute
• More short columns
• STOP THE SOCIAL SECURITY POVERTY MACHINE, Deseret News, Mar. 8, '99, by James Ferrin, a certified financial planner based in Orem
• WHY SOCIAL SECURITY IS BANKRUPT, Brainstorm Magazine, Feb. '99, by Ted Abram, American Institute for Full Employment
• How Clinton's Social Security plan kills your chance to be a millionaire
• NORTHWEST COMMENTS ON REFORM, Brainstorm Magazine, Feb. '99
• Short Columns, That should infuriate you and make you vote for anyone not democrat or republican
• A Real Solution to the Social Security Crisis: Testimony of José Piñera, President of the International Center for Pension Reform, Co-Chairman of the Cato Project on Social Security Privatization before the U.S. House Committee on Ways and Means, February 11, 1999
• THE SOCIAL SECURITY TRAP, Intellectualcapital.com, Jan. 21, '99, by James K. Glassman, the DeWitt Wallace-Reader's Digest Fellow in Communications at the American Enterprise Institute
• SOCIAL SECURITY MEETS THE 21ST CENTURY, Cato Policy Report, Feb. '99, by José Piñera, co-chairman, Cato's Project on Social Security Privatization
• SOCIAL SECURITY INVESTMENTS MUST BE MADE BY WORKERS THEMSELVES, Los Angeles Times, Feb. 21, '99 by U.S. Rep. Christopher Cox, (R-Newport Beach), Chairman of the House Policy Committee
• FATAL CONCEIT IN SOCIAL SECURITY SUBSIDY, The Wall Street Journal, Mar. 2, '99, by Thomas J. DiLorenzo, Professor of Economics, Loyola College
• PRIVATIZE SOCIAL SECURITY ... FOR THE CHILDREN, Investor's Business Daily, Feb. 22, '99, by Doug Bandow, a senior fellow with the Cato Institute
• SOCIAL SECURITY REFORM URGED, Denver Post, Feb. 17, '99, by Steve Raabe
• THE ADMINISTRATION'S BEWILDERING ASSERTION, Cato Institute, Feb. 19, '99, by Michael Tanner, director of the Cato Project on Social Security Privatization
• NINTH-GRADERS WORRY ABOUT THEIR FUTURE, Binghamton Press, Feb. 22, '99, by Wyn Hornbuckle, Staff Writer
• GOVERNORS OPPOSE SOCIAL SECURITY FOR STATE WORKERS, Reuters, Feb. 23, '99
• A DIFFERENT SOCIAL SECURITY IDEA, The Chattanooga Times & Free Press, Feb. 21, '99, Editorial