ast week the Washington Post reported that congressional Republicans are in full-scale retreat on Social Security. The National Republican Congressional Committee (NRCC) has urged candidates to disavow their association with the concept of privatization. This is dreadfully bad policy it could stunt the movement toward reforming the biggest entitlement program in the federal budget by 5 to 10 years. But it is also questionable politics. Optional private investment accounts are a political winner that can attract a new generation of voters to the GOP.
Around the country Republicans now find themselves cornered in the worst possible strategic position on this hot-button political program: they are increasingly perceived as unprincipled flip-floppers on the issue. The Republicans now have a number of candidates in close races being forced to explain why they were once for private investment account options and now are against them. The explanation is almost always feeble and unpersuasive.
Republican Senate candidate John Thune of South Dakota now says he absolutely opposes personal investment accounts as an alternative to Social Security and he is blasting his opponent, the Democrat Tim Johnson, for supporting privatization. If all these charges that Thune is alleging are true, then perhaps free-market conservatives should be supporting Johnson in this pivotal race.
Republicans and sensible center-oriented Democrats many of whom support private retirement accounts themselves are best off seizing the offensive on this issue, rather than cowering from it. They might want to take a page out of Pennsylvania Republican Pat Toomey's playbook. Toomey talks about private Social Security accounts as a citizen-empowerment issue. He also touts private investment accounts as a civil-liberties issue for black and Latino voters who have the most to gain financially from establishing personal accounts. By the way, Toomey represents Allentown, Pa., which is one of the toughest districts for a Republican in the country.
Democrats smell Republican blood on Social Security. They say that the stock-market collapse and the corporate scandals make Social Security reform a financially irresponsible option that will lead to the looting of retirement earnings. Left-wing political operatives are running shameless senior-citizen scare campaigns that accuse Republicans of wanting to steal grandma's Social Security check and use the money to enrich Wall Street investment houses. But the amazing news is that the public doesn't buy it not even the seniors.
In July the Cato Institute sponsored a poll by John Zogby on public attitudes regarding private investment accounts. The poll found that even in the wake of the bear stock market and the corporate scandals, 68% of Americans support Social Security choice options and only 29% oppose them. Support is off the charts among young workers (more than 80% are in favor of private options). Among seniors, 54% support the choice for young workers.
Advocates of private investment accounts should be eager to engage the anti-choice Democrats in a debate on Social Security. They should ask:
The private investment plans are politically invulnerable to attack as long as they are based on three pre-conditions. First, the private accounts are optional. Every American should be permitted to stay in Social Security if that is his or her wish. Second, Social Security benefits to current and soon-to-be retirees should be guaranteed. Private accounts mean no benefit cuts not now, not ever. Third, the federal government will provide a safety net for any young worker who reaches age 65 and does not have a sufficient income to retire on.
Even the decline in the stock market is no argument against private investment accounts. After all, two years ago privatization opponents said it would make no sense to invest when the stock market was at the top (Dow 10,000 and Nasdaq 5,000). So today, doesn't it make sense to start the investing when the market is near a bottom?
More, when investing for the long term, it doesn't much matter what day you start on. There is no 40-year period in U.S. history in which the Dow returned less than an 8% annual return. In addition, by investing a constant dollar average every month in the market, investors are protected from wild swings in prices, because the investor automatically buys more shares when prices are low than when prices are high.
Most importantly of all, private investment accounts can be established without any dollars being invested in the stock market. Workers could be given the option of investing their retirement dollars in risk-free United States government securities. These totally risk-free accounts would still pay the worker at least twice the rate of return that Social Security offers.
If Republicans take the questionable advice of the NRCC they may unwittingly cast aside an opportunity to capture millions of young voters for years and years to come. If Republicans want to disengage themselves from the term "privatization," that is fine. But the plan for private accounts needs to be embraced and defended for the good of the party this year, and for the good of our economic security as a nation for decades to come.
Stephen Moore is president of the Club for Growth. Thomas L. Rhodes is president of National Review and co-chairman of the Club for Growth.