Politics: Cashiering Social Security
Norquist, Grover G.
nized. Because federal, state, and local computer databases are not linked together, residents of this country enjoy what some refer to as "security through obscurity." The political implications...
...Even the business community has signed up, signaling that usually tepid K Street feels Social Security privatization is now so mainstream as to be safe for America's business class to endorse...
...Ten years ago, a politician who shouted "Social Security" in a crowded theater terrified the old folks and bored younger Americans...
...This investor class has a growing sophistication about the market...
...Today, bringing up Social Security is as likely to engage and enrage younger voters as frighten retirees...
...Voters also reject the three options pushed by the left to "reform" Social Security: 66 percent oppose letting the government invest Social Security taxes in the market...
...High taxes on corporate income would be paid not by "someone else" but by each and every investor...
...Two typical low-income spouses together would get $18,404 from Social Security, but if they invested instead they would retire with $693,395...
...There never was any "trust fund" or "savings" or "investment...
...They need to know it's safe to touch the issue with a ten-foot pole...
...This is because the returns to Social Security are getting worse each year, while as millions invest in IRAs and 4o1(k)s more and more Americans understand the power of compounded interest in investing...
...GOP Senators Judd Gregg of New Hampshire and Rick Santorum of Pennsylvania have weighed in for moving toward individual accounts...
...An average one-earner family would receive $29,301 in benefits, but could retire with $1.96 million if the taxes were invested...
...62 February 1999 • The American Spectator return than the stock market could...
...GOP Sen...
...Because the left has a hammerlock on his weakened presidency, he may have to fight for real reform of the program...
...Gridlock could yet delay Social Security privatization in whole or in part, but the Washington establishment has signaled that privatization will happen...
...Fear of cutting taxes before fixing Social Security kept the Senate from even voting on the modest $8o-billion tax cut passed by the House...
...The system wasn't intended to be as...
...The average two-earner couple together would get $33,394 each year in Social Security payments, on taxes which if invested at six percent would leave them with a nest egg of $1.6 million paying $97,699 in annual interest payments...
...An AP survey released on December 9 showed 75 percent of Americans believe fundamental reform of Social Security is necessary, and 75 percent favor letting people invest part of their Social Security taxes in the stock market (half of these say they would take up that option themselves...
...Conventional wisdom is that Clinton and the Republicans are circling each other warily and will end up with a fix to let younger Americans set aside a 3-perGROVER G. NORQUIST is president of Americans for Tax Reform...
...onerous as it is...
...The American Spectator • February 1999 63...
...Even assuming a conservative six-percent return, Ferrara points out, a two-earner couple, each paying maximum Social Security taxes, would earn, if those taxes were invested privately, $2.8 million upon retirement...
...It set up a "pay as you go" Ponzi scheme in which taxes immediately flow out to retirees...
...But he also introduced the issue of privatizing Social Security...
...He didn't beat Bob Dole, but he wasn't struck down for bringing this issue to prominence...
...The problems started the day FDR signed Social Security into law in 1935...
...He was the first to point out that Social Security provides younger workers with lower rates of Now that it's politically safe, privatization is inevitable...
...Rod Grams of Minnesota and Rep...
...Sam Beard, a former staffer for Robert F. Kennedy, is leading a coalition of liberals who favor private accounts and has organized the "Billion Byte March" to send e-mails to Congress in support of reforming Social Security with personal IRAs...
...Their children would inherit this $2.8 million sum, but nothing from Social Security...
...They will also discover the urgent need to arrest the development of programs jeopardizing our most basic civil liberties...
...Once again, the impossible has become inevitable...
...If heeded, Rep...
...In 1986 Republicans lost eight Senate and five House seats after Democrats claimed that Republican efforts to address the system's yawning unfunded liabilities would "destroy" Social Security...
...What kind of left can there be if lower-income workers retire with half-a-million dollars in the bank...
...An equally important if less understood reason for the shift in Social Security's political landscape is that more Americans than ever are comparing their Social Security taxes and promised benefits to what they could be getting if those taxes were invested privately...
...Through 1949 the maximum annual tax anyone paid was $6o — half paid directly by workers and half paid through his employer...
...Chamber of Commerce, the National Federation of Independent Business, the Small Business Survival Committee, the National Restaurant Association, and the National Retail Federation...
...That law did not establish individual retirement accounts or even one big pension fund...
...That Clinton wishes to reform Social Security as his legacy suggests he is planning past next weekend's talk shows for the first time in his life...
...According to polling data, more Americans under 30 believe in UFOs than believe Social Security will be there for them when they retire...
...has called for an "electronic bill of rights...
...Last year's budget deal suggests congressional Republicans are not well-prepared to fight against higher spending in times of surplus...
...Peter Ferrara, the chief economist for Americans for Tax Reform, wrote Social Security: The Inherent Contradiction for the Cato Institute back in 1978...
...economy...
...By 2013, the Social Security system will spend more than it brings in, which will require the federal government to retire $2.5 trillion in federal bonds financed by higher taxes on Americans...
...Bob Livingston's recent call to put Social Security off budget would set aside the needed surpluses to finance the transition to an investment-based Social Security system...
...But even on the left some see IRAs as an antidote to the gap between rich and poor...
...That's why the leadership of congressmen like Republicans Mark Sanford of South Carolina and Nick Smith of Michigan has been so important...
...E ven a looming crisis and a win-win solution aren't enough to move politicians to action...
...Ferrara notes that the present rate of return on Social Security taxes for a married couple with each spouse earning over $65,00o is a negative 0.45 percent...
...cent portion of the 12.4-percent payroll tax into personal retirement accounts...
...In 1950, the entire Social Security program cost only $1 billion, or 2.5 percent of the federal budget...
...Kyoto treaties that burden businesses would become the personal business of every owner of an IRA...
...As late as 1961, the total maximum annual tax for a worker was $287...
...Steve Forbes burst onto the political scene during 1996 GOP primaries and most Americans remember his introducing the idea of a flat tax...
...Doing so would put the rest of the budget back into deficit, which conservatives should welcome: They know how to campaign against government spending when the budget is in deficit...
...70 percent oppose raising payroll taxes to meet Social Security obligations...
...By 2030 what's left of the fabled Social Security "surplus" will be spent and the system will be bankrupt by any measure...
...Interest on this accumulated capital would pay them $170,788 annually, compared to $45,380 from Social Security...
...POLITICS by Grover G. Norquist Cashiering Social Security T he politics of Social Security has shifted so dramatically that reforming this "third rail" of American politics is now viewed inside the Beltway as mainstream and inevitable...
...But Democrats have talked themselves into a corner...
...A couple earning $65,000 each will get a o.78-percent return compared to average historical market returns of seven percent (over a period that includes the Great Depression, World War II, and Nixonomics of the 70's...
...If Gore's rivals in the next presidential election explore the administration's hypocrisy on privacy protections, they will discover a potent political issue...
...In their fight against the politics of class warfare and economic envy, conservatives have long backed converting Social Security into a system of real investments controlled by individuals...
...and 90 percent oppose raising the retirement age...
...in 1980, 20 percent...
...Gore has proposed letting consumers take their names off telemarketing lists, announced a White House directive requiring every federal agency to name an official in charge of compliance with privacy laws, and urged states not to sell information people provide when they apply for driving licenses...
...and has convened a "privacy summit" with high-tech businessmen and civil libertarians...
...Now Social Security spends over $400 billion annually, consuming 24 percent of the federal budget and 5 percent of the entire U.S...
...Every year, more Americans respond to the disparity between what they will get from Social Security and what they could achieve in the market," Ferrara said recently...
...today 46 percent of Americans (51 percent of voters) own stock...
...Both introduced measures to allow citizens to invest part of their Social Security taxes in IRAs—and both survived subsequent elections...
...He has said that privacy is "a basic Americanvalue" that must be updated for the computer era...
...Democratic demagoguery continued last year, as Bill Clinton stymied every GOP effort to cut taxes by demanding that we "save" Social Security first...
...The political implications of these embryonic national ID systems could be as fascinating as the new technology...
...Its membership includes the U.S...
...The first reason for this sea change is Social Security's current $9.5 trillion in unfunded liabilities...
...Modest steps to let citizens invest a 2-percent portion of their 12.4 percent have been sponsored in the House by Arizona's Jim Kolbe and Texas Democrat Charlie Stenholm...
...Polling is also driving reform...
...The vice president, a reputed expert on technology and cyberspace, has often spoken in recent months about how the new "information age" threatens personal privacy...
...Al Gore might wish to pass watered-down reform to neutralize this issue before a possible primary challenger picks it up...
...Finally, if he survives impeachment, Clinton could once again betray the left, as he did on welfare reform...
...John Porter of Illinois—perhaps the prototypical Republican moderate—have introduced legislation to let individuals move completely from the present scheme to a fully funded IRA...
...Or where every assault on corporate America becomes an assault on the retirement income of every American...
...The 3 percent is a compromise between the 2 percent proposed by Democrats Daniel Patrick Moynihan and Bob Kerrey and the 5 percent suggested by Republican Phil Gramm...
...The National Association of Manufacturers has created the Alliance for Worker Retirement Security, led by Leanne Abnor, late of the Cato Institute...
...However, the Clinton-Gore record on databanks of biometric information and national ID cards is surely more alarming than nuisance calls from telemarketers...
...In 1965, only ten percent of Americans owned stocks directly...
...It may have to wait for a new president, but talk of reform is no longer punishable by political death...
Vol. 32 • February 1999 • No. 2
