Sen. Chuck Schumer has called the recent Democratic takeover of Congress the end of the Reagan era.
If we believe a red flag that the Wall Street Journal has run up about a possible Republican capitulation with the new Democratic majority on Social Security reform, our own Republican president might prove Schumer right.
The Wall Street Journal and other sources now report that the Bush administration is expressing openness to forget the idea of private ownership as the basis for Social Security reform, and to work with Democrats to “save” Social Security as it is with tax increases and benefit cuts.
Badly needed reform of our wounded and limping Social Security system has been seriously hampered by what I call the politics of cynicism.
These politics are driven by politicians primarily motivated by protecting their own power and interests as opposed to those of their constituents.
What’s my proof that Social Security reform is driven by this cynical brand of politics?
No one could possibly argue that Social Security is a good program today. If we did not have it, and any politician tried to propose it and get it passed, he or she would be laughed out of Washington.
Social Security is a unique government program in that every taxpayer can personally evaluate it by asking the simple questions – what am I paying, what am I getting, and is it worth it?
The Heritage Foundation’s Social Security calculator tells me, for example, that a 25-year-old male earning $31,000 can expect, based on the Social Security benefit he’ll receive, almost a negative 1 percent return on the money he puts in over his working life.
If he purchased a diversified portfolio of stocks and bonds over this same period with this same amount of money, this guy could get an annuity five to six times greater than this Social Security benefit. But even a bank CD would produce a monthly payment that could double Social Security.
There are other relevant points that anyone who has been following this debate can recite. With a private account, this guy owns his money. Under Social Security, he doesn’t even have a legal right to the benefit – which is material because the government is constantly changing the rules.
Can you imagine getting a letter from your bank or broker saying they are lowering the return on your investment because they can’t afford to pay you what they promised?
But, this is what is about to happen, again, with Social Security.
Not only are the returns to taxpayers negative, but they are guaranteed, beyond any question, to get worse. The system is bankrupt and can only continue in its current form through some combination of tax increases and benefit cuts, which will drive what individuals get for what they put in even further south.
Why, then, does there seem to be a political consensus to save this monstrosity?
Politicians will tell you it’s because the American people want it. The polls say so.
And indeed they do. But the fact is taxpayers support this status quo out of fear and not knowledge.
Certainly, no sane individual would buy a program that has the personal investment economics that I just described.
When President Bush proposed changing the program to one of ownership and private accounts, the Democratic Party launched major league into the politics of cynicism. The message that working Americans heard was that they would be kicked off a government program guaranteeing them a payment at retirement in exchange for taking their money and investing it in the stock market.
Is it any wonder that many dived for cover?
I call this the politics of cynicism because there is not a single Democratic senator or congressman who would purchase an insurance policy with the type of legal and economic realities of Social Security. Shut the door and one by one they know the truth.
The Democrats’ campaign to “save Social Security” has really been a campaign to save their own butts.
To have endorsed the president’s reform would have been an endorsement of a fundamental move away from welfare-state politics that has been the bread and butter of the Democratic Party.
Now, playing on fears and not the real interests of working Americans, and the inability of Republicans to stick to and sell their message, the Democrats have won.
The real victims are the low and middle income Americans whose hard-earned money is being sucked into this black hole that will only get deeper and blacker. This is happening while Democrats bewail wage and wealth stagnation at the lower end of our income spectrum.
Is a Republican White House, for fear that it will look like it did nothing on Social Security, about to join Democrats in the ranks of the politics of cynicism?
The Reagan era is still alive for this writer. Let’s hope it’s still alive in the Bush White House.
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