As the congressional elections approach, congressional Democrats are, like clockwork, beginning their biennial demonization of Social Security reform. Recently, the Democratic National Committee released an ad that argued that a privatized plan would lead to benefit cuts and delayed retirement. It showed a cartoon of President Bush shoving not one, but two elderly people out of wheelchairs. The attacks continued with House Minority Leader Richard Gephardt (D-MO) accusing Republicans of waging a "stealth campaign" to "gut" Social Security after the election.
As bad as these attacks are, the response from congressional Republicans is worse. When confronted with ads like those, Republicans quickly forget about their reform plans and pledge to uphold the current system. Such a response may be effective at deflecting criticism. However, it does considerable damage to the long-term prospects of Social Security reform. Before agreeing to support any kind of substantial policy change, people often need to hear the issue debated for a number of years. However, if Republicans insist on dodging the issue, these sorts of discussions will never take place.
Clearly, supporters of privatization need another strategy. One possible idea is that of raising the stakes in this debate, both figuratively and literally. This could be done through a wager. For instance, Mark Racicot, chairman of the Republican National Committee, could make the following proposal to his counterpart at the DNC:
"Starting today let's take two workers, each earning an identical income. One will be allowed to invest 2 percent of his income in a privatized Social Security account. The other will have to place the same amount of money into the current government-run system. After a specified amount of time, we will calculate the amount of return each worker would have received on his investment. If the worker who put his money into a privatized account comes out ahead the DNC will pay the RNC the difference. Likewise, if the reverse happens, the RNC will pay the DNC the difference."
Such a wager could change the dynamics of the debate on Social Security reform. Suppose the Democrats refused such a wager. They would face criticism for refusing to believe their own advertising, and having little faith in their own policy proposals. However, if they accepted the wager, the private accounts would surely come out ahead in the long run. This would visibly demonstrate the benefits of privatization in a way that is easy to understand and would advance the prospects for reform.
It should be noted that advocates of liberty have used high profile wagers to their advantage in the past. For instance, one of the most famous took place in 1980 between economist Julian Simon and biologist Paul Ehrlich. Ehrlich, author of "The Population Bomb," was an advocate of government-mandated population control. He was convinced that overpopulation would cause the world to exhaust its supply of natural resources. However, Simon had a different view. He felt that increases in human ingenuity would increase the supply of many commodities, resulting in greater abundance for all.
During that time the academic community was enamored with Ehrlich, and Simon found it difficult to get people to consider his ideas. As a result, in 1980 he proposed a wager, which Ehrlich quickly accepted. Ehrlich got to invert $1,000 in any five natural resources. If after 10 years the resources became more scarce and prices went up, then Simon would pay Ehrlich the difference. However, if resources became more abundant and prices went down, Ehrlich would owe Simon the difference. Indeed, by 1990, the prices on each of the five commodities went down and Simon pocketed a cool $567.07 from Ehrlich. While Ehrlich to this day downplays the importance of the loss, Simon's successful wager did generate some publicity and gave his ideas greater credibility.
Something similar could happen with Social Security reform. A wager would for once put the Republicans on the offensive on this issue. It would facilitate debate and discussion as people could see the tangible benefits of private Social Security accounts. Finally, the Democrats would be left with fewer resources to air their misleading attack ads around election time.