Jewish World Review Sept. 3, 2004 / 17 Elul, 5764
Real conservatives should shudder at privatizing social security
NEW YORK The "ownership society" is the new domestic message at the Republican National Convention. It includes a proposal to let workers put some of their Social Security taxes into personal stock accounts. According to theory, these investments would grow handsomely over the years. Workers could then retire with more money than that boring old Social Security program would have paid out.
Liberals squawk loudest at any plan to privatize Social Security, but conservatives are the ones who should be screaming their heads off. Do conservatives really want the federal government getting involved in the investment decisions of American workers? Having Washington play matchmaker between Wall Street and the nation's hairdressers, bus drivers and cashiers can lead only to bad things: corruption, scandal and a taxpayer bailout of biblical proportions.
Let's start with the bailout. Imagine we're back in early 2001, after the exploding Wall Street bubble vaporized stock wealth across the land. Suppose that millions of Americans planning to retire around that time "owned" Social Security accounts. These folks had made big plans buying condos, quitting their jobs and so on based on their formerly fat portfolios. Their dreams are now dust.
Does anyone think red-blooded Americans would simply shrug their shoulders and say, "That's Wall Street for you"? No, the retirees would grab their pitchforks and demand that Washington do something about their losses. That something would surely involve the taxpayers in a big and painful way.
Wouldn't happen, you say. Workers whose Social Security stock investments went south would have to act like big boys and girls. If their stocks did poorly, then they'd have to live with the consequences. The market involves risk. The workers should have known that. So the taxpayers would be off the hook.
Such optimists would do well to recall an exchange that took place during the last presidential campaign. Then-candidate George Bush was floating the Social Security investment-account idea. Someone asked him whether he'd back a government guarantee for Social Security investment accounts.
Bush did not answer, "No, you must be crazy." His answer was that he would think about it. Other supporters of privatizing Social Security openly talk of arranging a guarantee for these investment accounts.
Even if there were no explicit government guarantee, there still would be an implied one. After all, the federal government would be deciding which investments were suitable for Social Security accounts. Never mind that terrible things can happen to the stock prices of the most solid companies. Seemingly good stocks can turn out to be frauds. Before it imploded, Enron was widely considered a conservative investment.
And so we can easily picture a scenario in which Americans drag the charred remains of their Social Security accounts to Washington and yell: "You let me buy this junk! You make me whole!" It's not impossible.
Then, there's the corruption angle. A program that steers billions of Social Security dollars to Wall Street would create opportunities for bottomless evil. Fortunes would hinge on getting the federal government's seal of approval for this or that mutual fund. The resulting gold rush would make the fetid swamp of today's campaign-finance system seem a pristine mountain stream by comparison.
Back on Wall Street, eyes must be welling with tears at the thought of dragging the little people and their Social Security billions into the casino. And it should surprise no one that banks, brokerage houses and mutual funds have become the most generous of hosts at the Republican convention.
Of course, Americans can already invest their own money for the future. And the federal government encourages them to do so by offering tax breaks for 401(k) plans, Individual Retirement Accounts and other savings plans. These vehicles have nothing to do with the Social Security program (which remains wonderfully predictable). And workers who have them clearly understand that they are blessed by or stuck with their investment decisions.
Conservatives everyone should think this through. Social Security investment accounts would have the federal government, in effect, collecting taxes for Wall Street. And given the political realities, the "ownership society" would mean that the beneficiaries owned the profits and taxpayers owned the losses. That's what privatizing Social Security is all about. Real conservatives should shudder at the prospect.
Froma Harrop is a columnist for The Providence Journal. Comment by clicking here.