False equivalence

This Times article suggests that today's social security debate is similar to the debate over the Clinton health care plan 13 years ago. Sometimes in their obsession to find historical precedence for everything, the media can get it completely wrong.

I believe the Clinton connection was first brought up by Democrats, who claim to have learned a thing or two from the debates over the Clinton health care plan that they hope to use in the debate over social security. Tactically, the Dems can apply some lessons from that debate, to be sure - but no one should suggest that there is any real similarity in the level of concern over these two issues.

Health care was and is a top concern of many Americans. Social security is not even close. During the '92 election campaign, many people agreed that something needed to be done about the uninsured in this country. In fact, it was Harry Truman who first proposed universal health care 60 years ago, yet it has sadly never come to pass.

So, while Clinton could credibly argue that the current health care system was in "crisis" (and use the numbers of uninsured Americans to back him up) this President has struggled to convince even members of his own party that social security is in "crisis" (in fact, some Republicans scoff at the claim). As new numbers released yesterday by the Congressional Budget Office reveal, social security, as it now stands, can pay 100% of benefits until 2052, and after that can only pay 78%. The CBO arrives at these figures by assuming a 1.9% economic growth rate -a very conservative number.

As the Times piece points out, the idea of private accounts was a reliable applause line for Bush on the campaign trail. The main rationale for private accounts is that your money would appreciate faster leaving you with more come retirement. And perhaps this is true, depending on the risk one assumes and the fees charged for managing the accounts. However, as Paul Krugman notes in his column today, proponents of private accounts, including the Bush administration, often assume 6.5% rate of return on the money diverted from payroll taxes into these accounts. Krugman works backwards from that assumption and reveals that this 6.5% is based on an estimate of robust economic growth (as opposed to the CBO report), so robust, in fact, that using the same estimate of economic growth, the social security trust fund would likely never fall short.

In light of this fact, it seems that Bush's main strategic blunder in promoting private accounts is his claims of a crisis where there isn't one. If Bush simply said he wanted private accounts , he might gain some support, but to simultaneously claim that the system is in crisis and that your solution will leave people better off just doesn't add up. Unlike the Clinton health care plan, Bush's biggest stumbling block is that, despite his claims to the contrary, there is no crisis in social security.