If you thought President Clinton's proposal for a government takeover of the American health care system was a good idea, you will love his plans for a bailout of the Social Security system. In one of the most radical proposals ever put forward by an American president, Clinton has called for the federal government to invest directly in the stock market, thereby becoming partial owner of nearly every major American corporation. That idea -- government ownership of American business -- represents perhaps the greatest increase in government power since the advent of the income tax.
Federal Reserve Chairman Alan Greenspan has warned that this proposal "has very far-reaching potential dangers for a free American economy and a free American society." It is easy to see why.
Will the government vote its shares, use its newfound clout to control how companies do business? Will there be a government bureaucrat sitting on every corporate board? That is not as far-fetched as it might sound. State and local public employee pension funds have routinely attempted to use their leverage to influence corporate policy.
Even if the government does not directly vote its shares, its choice of companies to invest in will have a major impact on the American economy. The government will be picking winners and losers, with favored companies receiving millions of dollars in government investment. Which companies will those be? Will the government use the promise to invest -- or the threat to withhold investment -- to blackmail companies into pursuing policies that the government favors? Will campaign contributors and other special interests be rewarded with our retirement dollars?
If nothing else, President Clinton has made clear the lines of this debate. The future of Social Security will be a choice between government investment and individual investment.
Despite its radical departure from the American political and economic tradition, the president's proposal would do very little to save Social Security. Even under the optimistic assumptions put forward by the administration, Social Security would not be "saved" -- merely kept barely alive for a few more years. Bankruptcy would be postponed, not averted. The system would still provide young workers with a negative rate of return, meaning that they would pay more in taxes than they would collect in benefits. (In fact, because the president would use additional tax money from general revenue to bail out the program, the actual rate of return would be even worse). And, perhaps most important, workers would still have no legal right to their Social Security benefits. They would still be dependent on the whims of politicians for their retirement security.
In pursuing this proposal, the president has rejected an opportunity for truly historic Social Security reform. A new Social Security system based on individually owned, privately invested accounts would yield the higher returns of private capital investment but give those returns to individuals rather than to government. A system of individual accounts would broaden worker ownership of American capital rather than government ownership of American business. Individual accounts would give American workers a legal property right to their retirement money rather than leave them dependent on government.
If nothing else, President Clinton has made clear the lines of this debate. The future of Social Security will be a choice between government investment and individual investment. The president has made it clear that he does not trust average Americans to make decisions about their own future. Speaking to a rally last week in Buffalo, he told the audience, "We could give it all back to you and hope you spend it right. But if you didn't spend it right…[all manner of terrible things would happen]." Contrast that attitude with the words of Sen. Robert Kerrey (D-Neb.), a supporter of individual accounts. "I believe in the destiny of the American people -- not the density of the American people."
That will be the debate in the coming months. Few issues will be more important to the future of this country. When the president tried to socialize the U.S. health care system, the American people rose up and rejected it overwhelmingly.
The question is, How will they respond to this new threat