BACK TO THE DRAWING BOARD
Republican Reps. Bill Archer (Tex.) and Clay Shaw (Fla.) are set to unveil a Social Security plan next week. Advocates of Social Security reform have been quietly debating whether to start reform from inside or outside the Social Security system, with the weight of opinion falling on the inside. (We're outside, for what it's worth.) Archer-Shaw apparently manages to compromise by combining the worst features of both approaches.

A spokesman for Archer says that he cannot discuss the details, which are still being worked out. But other sources tell us that the plan is an add-on to Social Security. Far from cutting payroll taxes, it raises the tax burden from Social Security by 16 percent to 14.4 percent of income. This is to finance individual accounts; the government will seed these accounts with a 2 percent refundable tax credit that eats up 60 percent of the budget surplus over the next ten years.

The accounts, however, would have the restrictions of plans that start from inside the Social Security program. The government would manage the accounts, contracting out investment of the money to companies. Individuals get to choose which company, but every company would have to put 60 percent of the money in a broad stock index fund and 40 percent in a corporate bond fund. Companies, therefore, would be competing on the basis of their administrative costs.

The plan is at least consistent: Having made it difficult to attain higher returns, it also destroys any incentive to do so. Upon retirement the government takes charge of the account and doles out benefits-either the annuity value of the account or the benefit currently promised under Social Security, whichever is higher. If it's the former, beneficiaries get only a tiny share of any extra returns "their" fund earned. And-again, based on what we've been able to learn about the plan-the government keeps all the money upon the retiree's death. You can bequeath your funds only if you die before retiring.

This plan looks unlikely to go anywhere. Business groups aren't enthusiastic about it. The free-market groups are opposed to it. And while the House leadership won't stop Archer from advancing the bill, it doesn't like the plan-as Denny Hastert has made clear in several meetings, the latest one yesterday. That dislike isn't just ideological; a poll on the bill's approach by Linda DiVall didn't return favorable results.

Rep. Archer has done a lot to promote the idea of Social Security privatization. This plan looks likely to undo some of the progress he's helped make, by creating a squabble among reformers and letting Clinton get to his right on the crucial issue of personal control of accounts. (No, we haven't given up on USA Accounts.) Is this really how Rep. Archer wants to close his congressional career?