Of course, if we had any details of George W. Bush's plan to partially privatize Social Security, this would be an easier column to write. Which is exactly why you won't see him filling in the blanks anytime soon.
Our first consideration is: Is this move necessary?
The much-ballyhooed bankruptcy of the Social Security system is based on the unlikely premise that the economy will grow no faster than 1.7 percent a year. (It did better than that during the Great Depression.) For the past three decades, the economy has grown at twice that rate.
But let's assume the laws of economic gravity have not been repealed, the "new economy" is not the discovery of perpetual motion and capitalism will behave like capitalism. We need to do something about Social Security, particularly given the demographic bulge of the baby boomers, who will begin retiring in 2011.
Three things that we can do about this we know will work: raise taxes, cut benefits or raise the retirement age. Politicians hate all three.
The Gore plan is to keep dumping the system's surplus and some general revenue into paying down the national debt. This will have several happy side effects. Eliminating the debt would put downward pressure on interest rates, stimulate economic growth, create jobs and produce more payroll tax money to keep Social Security in the black -- a sort of follow-the-bouncing-ball effect.
Bush's plan is to privatize part of Social Security on the theory that money invested in the stock market will earn more than the no-risk bond investments of the current system. He says he wants people to have control of their money and promises that a worker could "end up with hundreds of thousands of dollars for retirement." Sounds like the man on late-night TV who sells the slicer-dicer.
Bush's apparently modest proposal comes on like one of those "So what could it hurt to try it?" deals. We have no details, but Bush's advisers hint that he has about 2 percent of the FICA tax in mind (though he did indicate in a speech that he ultimately thinks about half your retirement money in stocks would be good).
The first thing you'd have to do is design a system in which people couldn't, in fact, control their own money. If you give people on the economic margin 2 percent of their FICA tax, the first thing they do is buy shoes for the baby and the second thing they do is pay off the electric.
The personal savings rate in this country is the lowest it's been since the Depression, and credit-card debt has reached $584 billion. According to the Federal Reserve, that's a 60 percent increase since 1994, which may have a lot more to do with the "new economy" than its proponents like to think.
OK, so you find some way to force people to put this money in the stock market. Naturally, it costs them money to do that.
Wall Street stands to gain so much from this scheme that it blows the mind. Bush advisers claim that all this can be done for 1 percent of the expected profits, which is ridiculous. Many analysts think that administrative costs alone will eat up the difference between what the current system earns and historical stock-market returns.
But that's a detail. Here's another detail: Investment fraud jumped 20 percent from 1995 to 1999, according to the Securities and Exchange Commission.
Next consider this: What happens if we dump $1 trillion (2 percent of FICA) into a bull market that many analysts think is already overvalued? Whee!
Economist Paul Krugman explains what happens even if current stock valuations are reasonable:
"You see, those high returns cited by Mr. Bush -- the returns that are supposed to produce huge gains for workers free to make their own decisions -- are what stock investors got during an era in which people were very leery of stocks, and hence prices were low compared with earnings.
"Now that people are no longer so nervous, prices are much higher compared with earnings -- and the higher the price you pay for an asset, the lower the rate of return on your investment. (Duh.)
"So rate of return on stock investments made now will probably be much lower than the returns people got in the past. (Remember, this is the optimistic scenario, which claims that current values are reasonable -- if they aren't, the return will be even lower.) And that means that the proposition that individual investors can expect to do a lot better than the Social Security Administration -- so much better that we can wave away concerns about increased risk -- evaporates."
The devil is in the you-know-what.
Molly Ivins is a columnist for the Fort Worth Star-Telegram. To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com. COPYRIGHT 2000 CREATORS SYNDICATE, INC.