Social Security and the Ballot Box

By Fred Brock

The NY Times,  October 6, 2002

As the November election approaches, House and Senate stalwarts of Social Security privatization have backed away from the issue as if it were toxic.

And for two very good reasons.

First, if past voting patterns hold, older Americans will have more influence than ever because in nonpresidential election years, younger voters tend to drop out. In the midterm election of 1998, some 58 percent of the voters were over 45, nearly half were over 50 and close to one-third were over 60, according to census data and surveys of voters leaving the polls. In recent presidential election years, fewer than one-quarter of voters were over 60.

Second, nearly 70 percent of Americans over 60 strongly oppose private Social Security accounts that would allow investment in stocks and bonds, according to a poll in August for the Alliance for Retired Americans, an advocacy group, by Peter D. Hart Research Associates.

Interestingly, the question on privatization did not use the words "private" or "privatization." It simply described the proposal for personal accounts that is supported by President Bush, most Republicans and some conservative and moderate Democrats. That is important, because proponents of privatization have found in their polling that the term "privatization" — not necessarily the concept — is viewed negatively by voters. That is why Republican strategists have urged their candidates to avoid the "p" word. Even the libertarian-oriented Cato Institute, which has pushed aggressively for private Social Security accounts, has changed the name of its effort from Project on Social Security Privatization to Project on Social Security Choice.

But the Hart poll indicates that the problem is more than a choice of words, especially in light of the stock market's swoon and scandals that have engulfed corporate America.

Hans Riemer, a senior policy analyst at the Campaign for America's Future, a liberal research organization in Washington, says politicians are avoiding the privatization term to obscure the picture and to convince the public that they're not advocating major change. "Most are trying to inoculate themselves on the issue and not have a real debate about it," he said. "It's an election-year trick, not a conversion."

So, assuming that they win, will these representatives and senators go right back to pushing for privatization? "They might," Mr. Riemer said. "But it's going to be tough to switch back after backing away from it in a campaign." He expects, however, that if the Republicans retain control of the House, there will be a vote next year on privatization of Social Security; if the Democrats take the House, the issue may be dead for a long time.

Some opponents of privatization fear that with talk of war with Iraq dominating the news, Social Security and other domestic issues will take a back seat on Election Day.

But Mr. Riemer says that pocketbook issues are bubbling along just beneath the surface and will wind up as the main factor in determining how people vote.

"What's on people's minds back home may be more their 401(k) plans than Iraq," he said. "These stock market plunges have a huge impact on people's lives. They are concerned about the market, the economy, about losing jobs. I don't think war talk will divert their attention. They're going to vote for people they think they can trust to handle their Social Security."

People like Mr. Riemer object to privatization because the money diverted to personal accounts in Social Security, a pay-as-you-go system, would cause a cut in benefits unless the government borrowed to make up the difference. "There would have to be hundreds of billions of dollars of deficits," he said, "in an environment where we're in deficit, we're looking at the prospect of war and the economy could very well be on the verge of another recession."

He also fears that personal accounts invested in stocks would create a two-tiered system of winners and losers that could damage the social fabric. "They say with the average return of the market, everyone's better off," he said. "But average means nearly half of the people don't do as well."

Proponents of privatization argue that it will "save" the Social Security trust fund from going broke as increasing numbers of people retire. But some economists say such dire consequences are unlikely anyhow because the Social Security trustees use economic growth projections that are too pessimistic. These economists say that even with these pessimistic projections, the trust fund is rock-solid until 2041 and, with relatively minor tinkering, probably for 30 years after that. Slightly more optimistic projections — in line with historical growth rates — brighten the picture considerably.

Jeremy J. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania and the author of "Stocks for the Long Run" ( McGraw-Hill, $29.95), agrees that economic growth will go a long way toward solving Social Security problems.

Nevertheless, he favors partial privatization, not because it will rescue the system but because he thinks it will encourage people to save. He's not too concerned about creating winners and losers. "Our 401(k) plans generate winners and losers; we've certainly accepted that," Professor Siegel said.

Roger Zion, a former Republican representative from Indiana, is the honorary chairman of the 60 Plus Association, which bills itself as a conservative alternative to AARP. A strong advocate of privatization, he scolds Republican candidates for running away from the issue. "They should not be afraid," he said. "They should stick to their guns."