Social Security 'rescue' might doom it instead

March 19, 1998|By Robert Reno

STOCK prices seem to be saying, "What Asia crisis?" with every new leap toward that however distant point at which this incredible bull market exhausts itself with results we can only hope will more resemble the events of 1987 than the events of 1929.

This helps explain why there's such growing respectability for the notion that Social Security, like garbage collection or bus service, can and should be at least partially privatized in the interest of "saving it."

Model of efficiency

And there's the popular argument -- also growing in respectability -- that all government programs are inherently inefficient and corrupt. But this is a curious view when you try to apply it to Social Security. The system extracts administrative costs of barely 0.8 percent of the benefits it pays out. Show me a private benefits provider that wouldn't kill for that margin or that has a better reputation for avoiding corruption and not victimizing beneficiaries. When did you last hear a geezer complain he regularly misses Social Security payments?

Anyway, Sen. Daniel Patrick Moynihan, the New York Democrat, offered his own plan this week for "saving" Social Security. It includes, among other things, partial privatization. Ten or 20 years ago, of course, it would have been unthinkable to suggest privatization. Social Security was too sacrosanct, too popular. I guess he is now suggesting the impending "bankruptcy" of the system must force us to do the unthinkable to avoid the unthinkable.

I'd suggest what's really driving this fad for privatization isn't Mr. Moynihan's steely analysis of the system's weakness but the cruder fact that the stock market is going bananas. In these heady times, who can resist imagining that people should be allowed to keep some of the high payroll taxes they're now paying so they can play the stock market -- especially if it helps "save" the system? But imagine proposing privatization in 1987, when the market suffered a one-day, 22 percent crash, or in whole decades like the 1950s, '60s and '70s, when the Dow Jones industrial average performed miserably compared with its recent record.

Risky business

It is popular to compare Social Security's rather puny 1.5 percent return on investment with the typical long-term return of about 8 percent on equities. But when you compare a no-risk investment with a high-risk investment, you always get this kind of spread. We are now told that Social Security itself is at risk, that it must, as it were, be downgraded as an investment. Very well, it can be made secure. There are no shortages of ways to do this and none of them is as difficult or painful as the public is being led to imagine.

Mr. Moynihan, in proposing its partial dismemberment, called Social Security "our one great social welfare achievement of the 20th century." But if it is such a "great" and "social" achievement, wouldn't this be the strongest argument for not ripping off a piece of it to be handed over to Wall Street? Those guys don't run social programs.

Robert Reno is a Newsday columnist.

Pub Date: 3/19/98

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