Most of Washington's loud advocates for privatizing Social Security have been rendered temporarily mute by the extended bear market. After all, the case for altering the universal guarantee at the heart of Social Security's success for the past 67 years was difficult to make even at the height of the NASDAQ bubble. Now that millions of investors have seen their private retirement accounts gutted by the collapse of stock prices, the risks of leaving even a portion of Social Security vulnerable to the same market forces are impossible to ignore.
Yet some of the true believers aren't allowing harsh reality to interfere with their ideological visions. In the past few days, congressional Democrats have called on President Bush and Republican leaders in Congress to renounce plans to shift a portion of Social Security funds into private investment accounts. So far, they haven't gotten any takers. (Meanwhile, the Democrats haven't formally renounced their previous support for the Clinton administration's plan for the government, not individuals, to invest a portion of Social Security funds in the stock market.)
Senate Minority Leader Trent Lott, one of the most vocal advocates for privatization, complained last week that congressional Democrats raising the issue now are "political scoundrels scar(ing) old people." Democrats occasionally have been guilty of playing cynical politics with Social Security. In this case, though, people are scared enough without the Democrats' help. And it is young people, not the elderly, who have the most cause for worry. Current retirees can depend on their Social Security benefits, but the costs and risks of privatization would raise the possibility of the program's being left insolvent much earlier than the current projection of 2038.
President Bush hasn't been talking much recently about privatizing Social Security, but he hasn't dropped his support for the idea. Last week, White House spokesman Ari Fleischer noted that the president still supports diverting a portion of Social Security into private investment accounts.
The president stacked his Commission to Strengthen Social Security with supporters of his plan to allow workers to divert portions of their payroll taxes to accounts that invest in stocks and bonds. Even the stacked commission failed to agree on a specific privatization plan, but it offered three alternatives that were favorably received by the White House.
Many privatization supporters concede that the issue has become too controversial to touch during the current campaign year, but they say their plans have only been delayed, not dashed. That would be unfortunate. Privatization is a false solution to a real problem, and Democrats and Republicans alike would have more credibility if they moved beyond the privatization debate and began dealing more honestly with the program's long-term solvency problems. Washington lawmakers should be investigating the merits of revisions such as lifting the income cap on payroll taxes or gradually raising the retirement age for workers in less physically demanding professions. Instead, they're propping up a simplistic idea the bear market already has killed for the foreseeable future.