Much has been heard about Social Security being “in crisis.” It isn’t. Very long term, there’s a potential problem if current longevity trends continue. We are living a lot longer, and sometime around 2040 there might be more people collecting than paying in. We shouldn’t ignore it altogether. But the so-called crisis isn’t why George W. Bush wants to gradually substitute private investment accounts for part of the trust fund. Like everything else in the Karl Rove White House, it’s a smokescreen.

Bush isn’t the sharpest tack on the bulletin board, needless to say, but his Wall Street friends have surely reminded him of what is bound to happen if a flood of new money pours into mutual funds and stocks all at once. That’s right…a bull market that will make the 1990s look tame. A new generation of Gordon Gekkos will proclaim that greed is good, indeed.

And that’s the whole point. Republicans have never forgiven Bill Clinton for anything. It’s not just about Monica Lewinsky. How unjust for Bush that a bull market in stocks ended just as Clinton left office! How unfair that the budget surplus under Clinton, created by the technology boom, quickly vanished as a recession set in! How awful that those terrorists waited until 2001 to fly planes into the World Trade Center and the Pentagon! Why couldn’t we blame Clinton for all that?

What drives stock prices, after all? Good economic news? Not really…because bullish announcements are usually discounted by the market, stocks more often go down. All economic news is both good and bad, anyway. A strong economy produces rising corporate earnings (good) but also engenders rising interest rates (bad). A weak economy is bad for earnings, but allows the Federal Reserve to cut interest rates; that’s good for stocks. Wall Street is usually conflicted by good news, in fact---except for that very rare bombshell, like an unexpected rate cut from “the Fed.” At the moment, of course, that isn’t going to happen, and the Bush administration knows it.

Do corporate earnings move the market? Sometimes they do, but don’t bet the rent money on it. If earnings growth is driven by rising inflation, stocks are more likely to fall, because price-earnings ratios contract with inflation and with the higher interest rates that follow. If corporations grow earnings through productivity, that’s non-inflationary, but it also means employment growth lags behind the economy or even stagnates, as jobs are outsourced overseas and workers are replaced by machines. That means fewer people contributing to 401-k plans, and fewer people bullish about the future.

In reality, the only sure way to create a bull market, and enjoy the reflected glow of approval it implies for a president, is to find a new source of funds. That’s where privatizing Social Security comes in. Create a new investment account, and the laws of physics take over. Momentum defies gravity. Remember what happened in the 1980s, when everyone, even the wealthiest taxpayer, was suddenly invited to open an I.R.A. account?

Speculators inevitably sense what’s happening, and they join the crowd. In fact, clever traders won’t wait…they’ll be buying stocks and driving prices up as soon as it becomes clear a privatization bill is going to pass, months before the first dollar arrives.

If Bush gets his way and privatization of Social Security is passed during this session of Congress, the Dow Jones Industrial Average will have already risen several thousand points by the time he signs the legislation. Next, as the cash flow arrives on the street, money managers will be forced to invest it, even at the higher prices created by speculators, because nobody pays investment fees to a manager to hold cash. That will drive prices higher still. It will be the late ‘90s all over again. George W. Bush will have a bull market to match Bill Clinton’s, and the tax receipts from realized capital gains will begin to lower the deficit…all things being equal, which they rarely are.

Of course, sometime toward the end of Bush’s second term, stock valuations will have risen to unrealistic levels. Pouring money into stocks can only push their prices up, but it never does anything to help the intrinsic value of the underlying company. For example, if the book value of XYZ stock (corporate net worth divided by number of shares outstanding) is $20 today with the stock selling for $30, an influx of new capital could drive the market price to $50 while the company’s book value remained at $20. The eventual result of such a dichotomy is a bear market. The stocks that have risen the farthest become the most vulnerable.

That’s what happened in 2000, after a half-decade of bubble economics, overnight millionaires, low unemployment, and self-directed retirement plans that eschewed safety in favor of aggressive purchase of dot-com stocks. And that’s what will certainly happen again after the privatization boom has lasted a couple of years. The difference this time, of course, will be that the Social Security System will have been compromised, along with the stock market. The people who opened private accounts most recently will lose money, just as those who enter a pyramid scheme at the end have to lose. Privatization of Social Security will have been exposed as a bureaucrat’s Ponzi scheme.

By then, of course, George W. Bush, who doesn’t need Social Security, will be heading back to Crawford. There’s always brush to clear, it seems.