Just in time for Halloween, Vice President Al Gore and the "status-quo crowd" are trying to scare senior citizens (now including Jack and Joanne Kemp, by the way) into believing that Gov. George W. Bush will bankrupt Social Security, if elected.
They think they can frighten folks into handing Gore the presidency by claiming Bush's plan to liberate workers by letting them use part of their payroll taxes to create their own personal retirement accounts will harm Social Security. They contend that privately owned and invested personal retirement accounts will use up money that covers current benefits, deplete the Social Security trust fund and threaten benefits owed to future retirees. That's pure demagoguery.
The fact is, there isn't any Social Security trust fund to deplete. The trust fund is purely a bookkeeping device, accounting for the difference between Social Security payroll taxes that come into the Treasury and what's needed to pay benefits to current retirees. Those excess payroll taxes are immediately spent by the U.S. Treasury on other non-Social Security programs such as food stamps, foreign aid, corporate welfare or debt retirement.
Ironically, the so-called trust fund really tracks the misuse of the funds. It also documents how much interest workers have forfeited because they are forced to overpay Social Security taxes rather than being able to invest those overpayments in a real interest-bearing account. To give this sham credibility the federal government treats the excess payroll taxes as a form of bond obligation - interest-bearing "loans" - with interest that should have gone back to working people.
The "lock box" Gore talks about overcharges workers on Social Security taxes and uses their hard-earned cash to retire other non-Social Security debt. It was bad enough when the government took Social Security revenues to pay for trillions of dollars worth of government programs and, worse yet, when politicians ran up trillions of dollars of deficits to spend even more. Now, Gore has gone politicians one better by trying to put excess Social Security taxes into paying off the very debt that profligate spending incurred. That he has the nerve to say this saves money for Social Security is the ultimate in chutzpah.
Bush wants to stop the Social Security overcharge, free up workers to save and invest that money in personal retirement accounts and build a "shareholder democracy" where workers can get their own stake in the American dream.
The Bush plan does not endanger Social Security benefits already owed to current retirees or middle-aged workers. Every last penny of benefits will be paid - in full and on time. By definition, excess payroll tax revenues are not needed to pay benefits. The only question is what to do with the excess revenues. Gore wants the government to spend it. Bush wants workers to keep it to build personal retirement accounts.
Only one fact really matters. According to the Social Security actuaries, by 2015 Gore's plan to retire the national debt will not leave enough current Social Security revenue to pay all Social Security benefits due. By contrast, Bush wants tax rate reductions that help the economy grow faster than the actuaries forecast, putting any revenue shortfall a number of years into the future. That's why tax rates and interest rates both must come down now.
But even under Bush's plan, a day of reckoning is inevitable sometime shortly after 2015. Does that mean Social Security will collapse? Of course not. It means the government will simply have to make up the difference by spending some of its other general revenues. The question is, how much and for how long?
Gore wants to burden taxpayers with an ever-larger obligation to cover Social Security expenses out of general revenues far into the future. That requires massive tax increases and no prospect of higher retirement benefits. But the vice president wants to hide this truth from voters by inflating the paper trust fund with sham transactions and pretending that redeeming assets won't require tax increases or benefit cuts.
Bush wants to level with workers and get them started now to build personal retirement accounts that will increase their retirement income and guarantee the federal government will have to rely less and less on general revenues to support Social Security in decades to come.
Bush's reforms add a vital element otherwise missing in this year's electoral contests. The governor is working to enhance the freedom of individual Americans to work, save and plan for their own retirement. The vice president, in my opinion, is fighting for the government's right to be command central in planning people's retirement for them. The issue of freedom needs to be restored to our pantheon of political values. Bush is making a good start while Gore spends his time railing against "big, bad oil" and insurance companies, and supporting big government.