Jack Kemp
There is a battle under way for Sen. John Kerry's heart and mind on Social Security. The growth wing of the Democratic Party understands, as did Bill Clinton, that investment in private markets must be at the center of any solution to fix the nation's retirement system. The left wing of the party, however, has another idea altogether, which was laid out in a recent Washington Post column by Ted Halstead and Maya MacGuineas of the New America Foundation.

Halstead and MacGuineas unveiled a proposal for the greatest expansion of the welfare state in the history of mankind -- even larger than Hillary Clinton's plan to nationalize health care. Under the guise of saving Social Security and Medicare as we know them, Halstead and MacGuineas would permanently fund America's two largest retirement programs out of general revenues by abolishing the 15.3 percent payroll tax and replacing it with a so-called "progressive consumption" tax, a new general-purpose tax that aims as much to redistribute income as raise revenue.

By severing the link between retirement benefits and their method of finance, which Franklin Roosevelt insisted upon to preserve Social Security as a retirement insurance program, not the dole, Halstead and MacGuineas would have Kerry turn Social Security and Medicare into the world's largest welfare programs.

Turning Social Security and Medicare into welfare programs would leave all but well-off senior citizens wards of the state. Rich people don't need Social Security; they can pay the onerous payroll tax every payday and endure the pitiful return on investment current Social Security benefits promise but can't deliver-averaging less than 1 ½ percent and actually negative for many African-American males whose life expectancy is 8 ½ years less than white males.

The rich have sufficient excess capital left over after the federal government confiscates more than 15 percent of their wages in payroll taxes to save and invest and provide themselves a comfortable retirement. After low- and moderate-income workers are through paying Uncle Sam the payroll tax, however, most of them don't have any excess capital left to save for retirement. The promise of Social Security is all they have.

Rather than transforming Social Security into a welfare program and increasing seniors' dependency on Washington, we should transform it into a 21st century retirement investment program that sets workers free to save for their own retirement in personal investment accounts and truly generates wealth through our capitalist system democratically.


Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
 
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