Chairman Archer’s Chilling Legacy

This commentary appeared in the Washington Times on July 1, 1999 and the Tribune Review on June 25, 1999.

Republicans seem to often be frustrated by President Clinton's skill at usurping their rhetoric to propose watered-down versions of their ideas that take the steam out of an issue. A case in point is Social Security. In his State of the Union Address, the president pilfered the positive language of privatization -- individual ownership, savings and empowerment -- for his USA accounts. Of course, USA accounts do not reform Social Security; they are a new entitlement altogether.

If the Republican leadership in Congress were willing to take Clinton on --revealing the dirty truth about his proposal and offering their own boldplan to reform the tax-and-spend program into a system based on individualownership and private investment -- they might win this battle. Severalpresidential candidates have distinguished themselves by calling for achange that a majority of the public already supports: namely, allowingindividuals to invest a portion of their payroll tax that currently goes toSocial Security.

Unfortunately, the GOP's congressional leadership trembles at the thoughtoftaking on the president over Social Security. They seem to be willing to dojust about anything to escape the possibility of facing an election inwhichthey are demagogued for "endangering" Social Security.

That may be why House Ways and Means Committee Chairman Bill Archer(R-Tex.)and Social Security Subcommittee Chairman Clay Shaw (R-Fla.) haveintroducedtheir Social Security "reform" proposal, which shows the awful consequencesof legislation built on fear and cunning rather than principle.In their efforts to avert disaster, Archer and Shaw may have created anevenbigger calamity. They welded together a reform package that equalsClinton's in emptiness but fails to match the president's rhetoric. TheArcher-Shaw proposal can best be described by what it does not accomplish.It does not give individuals real control over any portion of their payrolltaxes; it does not improve the rate of return individuals receive on themoney they send to Social Security; and it does not, in any meaningful way,move the system away from its current unfunded political promise toward asystem of individual accounts.

Instead, Archer and Shaw propose to prop up the existing program with aninfusion of new tax dollars. Individuals would have a small portion oftheir payroll tax monies placed in personal retirement accounts. But thoseaccounts would be "personal" in name only. Individuals would have toinvesttheir money under strict guidelines. As they stand now, those guidelineswould require that exactly 60 percent of the account be in equities and 40percent in bonds. Perhaps in the future Congress might increaserestrictions, or even handpick the companies deserving of those dollars.People would have little reason to care how their money was invested,since,under the Archer-Shaw plan, they would have to give it all back to thegovernment when they retired. The success or failure of the personalretirement account would be meaningless: Individuals would receive fromSocial Security the same amount that they are promised under current law.The only way an individual could realistically come out ahead under theplanis if he or she died before retirement, in which case family members wouldreceive the money in the account.

Chairman Archer appears to have fallen for the line that "benefits" consistonly of what the government hands out, not what individuals generate ontheir own. Now Chairman Archer is joining in the demagoguery. Mostrecently, he oversaw a hearing examining the many various reform proposals.He referred to proposals that truly would allow individuals to fundpersonalretirement accounts with their current payroll taxes as "cutting benefits."In Archer's eyes, it does not matter that most individuals would actuallyreceive higher benefits from those proposals since the accrued value intheir accounts would more than offset the reduction in the governmenthandout. He has unwittingly joined the side of the unions and the AmericanAssociation of Retired Persons in assuming that unless the governmentguarantees a payment, individuals will blow any money they set aside forretirement.

In his attempt to thwart the Democrats' plans to use Social Security as anissue in the next election, Archer has helped derail the movement toreplacethe antiquated New Deal program with a system based on individual ownershipand private investment. Rumor has it that President Clinton and ChairmanArcher are "working together" to meld their two proposal into a bill thatcould become law and thus ensure their mutual legacies. If Chairman Archertruly believes in conservative, free-market principles, he should shudderatwhat that legacy will be.

Carrie Lips

Carrie Lips is a Social Security analyst at the Cato Institute.