Commentary

Where’s Bradley’s Social Security Plan

By Andrew G. Biggs
January 15, 2000
Democratic Presidential contender Bill Bradley has gotten great political mileage out of the Clinton Administration’s second-term policy timidity. Bradley promises that nominating him rather than Vice President Al Gore would herald a return to “big ideas to deal with big problems.” Bradley’s health care proposal is indeed bigger, and better, than his rival’s. Yet as his recent appearance on Meet the Press demonstrates, on Social Security Bradley has been less the lion than the lamb.

Until recently, Bradley stuck by a vote he made in the Senate to consider increasing the retirement age to 70 and giving workers the option to invest 2 percentage points of their payroll taxes in personal retirement accounts.

But when attacked by Gore, who pledged to retain the current retirement age, Bradley quickly retreated, saying vaguely, “My position is that Social Security is the most important government program. It should be protected.” Likewise, Bradley is now “skeptical” about investing payroll taxes in the market, which would rule out both the Clinton Administration’s government investment plan and popular congressional proposals for personal retirement accounts.

So what does Bradley propose on Social Security? Not much so far.

Bradley’s campaign website poses the question “What should we do to save Social Security?” The candidate spends three-quarters of the response discussing Medicare. On Social Security, Bradley’s answer is merely that we should utilize budget surpluses to “shore up” Social Security. This is no more thoughtful or courageous than the White House and Capitol Hill plans, which manifest the “broken politics” Bradley claims to detest.

Bradley fails to acknowledge that, as a point of fact, projected surpluses will be nowhere near enough to close Social Security’s $20 trillion deficit. And when asked on Meet the Press what he would do if surpluses failed to materialize, Bradley responded, “I’m not going to get into going down the whole list of possibilities.”

Bradley hopes to be rescued by today’s strong economy, saying, “The most important thing to do if we want to save Social Security is to keep economic growth high over a long period of time. If we do that, Americans will be making more than they do now and therefore will be paying more tax into the trust fund.”

Yet, as a former member of the Senate Finance Committee, Bradley should know better. Social Security benefits are indexed to wages, so increased payroll tax revenues would be counterbalanced by increased benefit liabilities. Over the long term it would even out.

And in the short term, economic growth disproportionately flows to skilled and educated workers, whose earnings often already exceed the payroll tax ceiling of $76,200. Income gains to these workers would not improve Social Security’s balance sheet by a cent. And even if total compensation to lower-income workers increased, much takes the form of non-taxable benefits such as health insurance. This would not help Social Security either.

Bradley’s focus on balancing the books through economic growth ignores a far more important fact about Social Security: it’s a plain lousy deal. Even if Social Security’s funding shortfall magically disappeared, most retirees would receive an annual return of only around one percent, compared to the seven percent historical return from stocks throughout American history. Even under the rosiest economic assumptions, it still pays to transform Social Security into a fully funded system of personal accounts investing in stocks and bonds.

In a veiled jab at Gore, Bradley declares, “Political principle is tart in many mouths, but vagueness tastes like honey.” But on Social Security, Bradley has been as vague as Bill Clinton in front of a grand jury. In the Senate, Bradley voted to discuss reforming Social Security through personal accounts. The time to take that discussion to the nation is now.

Bill Bradley thinks that big problems demand big solutions. He is right. On Social Security, it’s time for Bradley to think bigger.

Andrew G. Biggs is a Social Security analyst at the Cato Institute.