Gore’s Republican opponent has made his position on Social Security explicitly clear. Governor Bush would allow younger workers to divert a portion of their Social Security payroll tax to individually owned, privately invested accounts. Agree with him or disagree, at least you know where he stands.
But Al Gore has constantly reinvented himself on Social Security. For a time there was the “What, Me Worry?” Al, who disputed the very need for Social Security reform. “If it ain’t broke, don’t fix it,” he told supporters. Soon he became Al Gore, Man with a Plan. Gore proposed using the federal budget surplus to pay down the national debt and credit the Social Security Trust Fund with the interest saved by retiring the debt. This would keep Social Security solvent until at least 2050, he claimed.
The only problem was that when the Congressional Budget Office looked at the proposal, they declared that “merely changing the bookkeeping for the Social Security trust funds may only make us feel better at the expense of our kids.” The General Accounting Office was equally dismissive, stating that the proposal “does not represent a Social Security reform plan and does not come close to ‘saving Social Security.’”
Then there was Anti-Investment Al, who denounced Bush’s proposal as a “risky scheme,” “casino economics” and “Wall Street roulette.” Anti-Investment Al declared that private investment is inherently risky because the stock market could collapse any day. This hardly seemed like the Al Gore who said last year that “one of the single most important, salient facts that jumped out at everybody is that, over any 10-year period in American history, returns on equities are just significantly higher than these other returns,” but for weeks Gore never missed a chance to denounce Governor Bush for relying on risky private markets.
That is, until he became Pro-Investment Al, who proposed his own plan for encouraging workers to invest in private markets. Gore’s plan is outside the Social Security system and relies heavily on government subsidies but still invests in the same markets he has recently denounced as inherently risky. In fact, Gore now points out that workers who invest even a few hundred dollars a year could accumulate hundreds of thousands of dollars for their retirement.
“Al Gore Disease” seems to have even infected his new running mate, Sen. Joseph Lieberman (D-Conn.). Lieberman once publicly supported a proposal for Social Security privatization very similar to the Bush proposal. In a 1998 interview, Senator Lieberman told the Copley News Service, “I think in the end that individual control of part of the retirement/Social Security funds has to happen.”
Now, however, Senator Lieberman opposes Social Security privatization. In late June, at Al Gore’s request, he wrote an article titled “My Private Journey Away from Privatization.” Interestingly, it was never distributed to newspapers and never published. It seems likely that, had Lieberman not been chosen as Gore’s running mate, his private journey would have remained quite private.
Gore’s discomfort is entirely understandable. It is no doubt difficult for him to pacify the far left wing of the Democratic Party, which demands no compromise on Social Security, while facing the simple reality of the program’s coming failure. As he struggles with his decision, here are some facts that he should keep in mind:
Social Security is facing a severe financial shortfall. In just 15 years the program will begin running a deficit and, trust fund IOUs notwithstanding, will not be able to pay promised benefits without significant new taxes on young workers. Overall, Social Security is more than $21 trillion in debt. Moreover, even if Social Security could pay all its promised benefits, workers’ return on their money is 1 percent or less, far below what they could receive from private investment. Finally, it is important to remember that workers have no legal right to their Social Security benefits and depend entirely on the whims of politicians for their retirement security. Moreover, because workers don’t own their benefits, their retirement savings cannot be passed on to their heirs.
George W. Bush has come up with a plan that at least starts to address these problems. His proposal would start Social Security on the road to solvency, increase the rate of return that young workers receive and give workers a property right to a portion of their benefits. It may not be the perfect plan, but it represents a big step in the right direction.
We are still waiting for Al Gore’s plan.