February 13, 2005

Dems Ignore FDR Personal Investment Plan

President Bush stumps the country whooping it up for Social Security reform. Democrats prowl the halls of Congress to squelch any change in the popular retirement benefit.

Fair enough, it’s the American way.

Nevertheless, the battle is an Armageddon of capitalism and socialism. We need some of both. The unending argument is, “How much?”

The Congressional Budget office estimates the Social Security IOUs on file -- to be called on the U.S. Treasury office when needed – will be gone in 2042. White House economists say 2018.

“When?” is quibble to the nth power. Shall we climb up and patch the roof while the sun is shining – or wait until the rain pours in and scatter drip pans around to keep dry?

This all depends upon the weather forecasting skills of our elected representatives. As of now, there are more rainmakers in Congress than roofers.

Bush proposes to offer – repeat, offer – young Americans an opportunity to tap into the retirement plan enjoyed by federal employees.

To wit: divert some – repeat, some -- payroll taxes paid by individuals into “personal retirement accounts.” Workers over age 55 are stuck with the present, dwindling Social Security benefits.

Personal tax-paid retirement accounts would be limited to super-safe annuities, mutual funds or triple- rated bonds – not common stocks. And pay back twice as much as that earned by Social Security trust fund Treasury bonds.

The government recognizes the investment strategy through the popular tax-deferred 401-K retirement accounts.

Liberal Democrats contend Bush’s similar plan is “playing the stock market!” Of course, this is waving a bloody shirt to frighten people accustomed to play now, pay later.

Enough already of scare tactics. Annuity investment cash-outs are, in effect, long-range certificates of deposit yielding twice that handed back by the government.

Tax-backed payment plans are self-defeating from git go. What the government takes away whole is depreciated by monetary deflation (printing press money). A dollar today in purchasing power, comes back years later as a half-dollar.

President Franklin D. Roosevelt was a canny politician who understood the power of “tax and tax, spend and spend, elect and elect.” Yet, he also understood the folly of pie in the sky.

In proposing Social Security that won him an unprecedented four terms, he clearly indicated the plan was unworkable without personal investments also.

Here is his message to Congress on Jan. 17, 1935:

* * *

“In the important field of security for our old people, it seems necessary to adopt three principles.

“First, non-contributory old-age pensions for those who are now too old to build up their own insurance.

“It is, of course, clear that for perhaps 30 years to come, funds will have to be provided by the States and the Federal Government, to meet these pensions.

“Second, compulsory contributory annuities which in time will establish a self-supporting system for those now young and for future generations.

“Third, voluntary contributory annuities by which individual initiative can increase the annual amounts received in old age.

“It is proposed that the Federal government assume one-half the cost of the old-age pension plan, which ought ultimately to be supplanted by self-supporting annuity plans.”

* * *

Note the word “compulsory” above. The problem today is that Democrats want the give-away part of FDR’s plan that produces votes -- without personal, private contributions.

They turned Social Security into welfare by vote- hungry politicos. The government-private partnership envisioned by President Roosevelt was prostituted to an election ploy.

Social Security is a bunco scheme relying on payroll taxes paid in -- and kept if the taxpayer dies before collecting. Shame. A personal plan belongs entirely to the payee to be enjoyed entirely by him/her or their heirs.

Dems, understandably, want to preserve their vote cow. But time has overtaken them. The time has come to fulfill all of Roosevelt’s proposal.

President Bush could kick the can down the road for the next guy. It is to his great credit that he has chosen to face the issue now when fixing is relatively painless.

If Democrats believe Roosevelt was wise and caring, they will hurry to catch up with the Republican train that has left the station.

Lindsey Williams is a Sun columnist who can be contacted at linwms@lindseywilliams.org