Inside the numbers: The economy and Social Security

Posted: May 10, 2005 12:00 AM

Just when polling numbers reflect a low point in the American public's outlook on money and government matters, a bright light at the end of the tunnel may be appearing for President Bush and his quest to reform Social Security.
Ironically, the same concerns over the economy and inflation that have brought down the president's approval ratings may be the catalyst for ultimate passage of a Social Security reform bill.

 Many in Congress -- mostly on the Senate side, and often Republicans -- have long expressed private and sometimes public concerns over Bush's initial proposal. That plan mixed the promise of private individual investment with a potential costly government augmentation of such a system.

 Since that time, the Bush White House has massaged the proposal to where it's now a plan partly based on the comparative wealth of beneficiaries.

 Whether this variation on the theme will gain the necessary momentum for passage on the Senate side remains to be seen. It's in the upper chamber that Social Security reform will either take wings or disappear.

 There is a growing belief that the concept of allowing individuals to invest a portion of what otherwise would be a contribution to the mislabeled Social Security Trust Fund might be just what the economy needs, just as it needed the first-term Bush tax cuts during the last recession and following Sept. 11.

 What America needs in this period of economic and political stagnation is something that brings to life the essence of the brand of conservatism that enjoys the widest allegiance among the population -- fiscal conservatism.

 Some argue that it's dangerous to rely on "gimmicks" to stimulate the economy each time it starts to lag. But much historical evidence supports the notion that just such measures work both in the near- and long-term.

 Many self-proclaimed liberals are loath to acknowledge that John Kennedy relied on what later came to be called "trickle-down economics" in formulating and passing a big tax cut during his administration.

 In speeches referring to the tax cut, Kennedy employed language eerily reminiscent of Ronald Reagan's when he, too, used tax cuts to free up personal spending and stimulate the economy.

 When Republicans forced President Clinton's hand and passed the capital gains cut in the mid-90s, the stock market suddenly became the focal point not only for the small, traditional investor class, but for average Americans, too.

 And when interest rates were cut to rock-bottom levels, perhaps even too low, Americans responded by accelerating an already vibrant housing boom.

 That brings us back to the Bush proposal. To date, it has met with a mostly unenthusiastic response from both elected officials and the public.

 At the same time, it's starting to become clear that any bill that will encourage Americans to invest in equities (or anything else) would likely have a positive impact on the economy, both now and in the future.

 Just as the cut in capital gains made the stock market and other financial vehicles widely popular, an expansion and encouragement of Americans to invest their own money -- otherwise only feeding the beast of Social Security -- would stimulate the economy by pumping the lifeblood of additional capital into our free market system. And at a time when the nation needs something new and exciting to propel it forward.

 Plus, a program that encompasses the notion of "privatization" might start to instill in Americans a concept that so far most aren't accepting -- that of saving money for their later years. A long-term reversal of this dangerous trend would be nothing but beneficial.

 The problem with Bush's proposal -- as is often the case -- is that it's so far been sold in a confusing and unimaginable way.

 Even so, as it starts to dawn on Congress and the American public that the economy may be entering into another protracted period of chasing its tail, both might be receptive to the idea of some combination of private and public funding of Social Security.

 If it's adequately presented to them, Bush's much-maligned Social Security reform proposal could provide immediate hope for another just in time rescue from economic doldrums.