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HenchPAC NewsHave you noticed what Vice President Al Gore's favorite word seems to be these days?
It's "risky."
That's the word he seems to be using about almost everything Gov. George W. Bush says. Particularly, Mr. Gore is repeating the "risky" word since Gov. Bush has proposed a plan to strengthen Social Security and offer the prospect of additional earnings and benefits in the years ahead.
So far as present beneficiaries and near-retirement Americans are concerned, Gov. Bush says no change should be made. Everyone should be assured he or she will get the benefits that long have been promised.
For others, he proposes that a small part of the 12.4 percent Social Security tax (possibly 2 percent) might be set aside for investment in stocks as each individual chooses, with each person having a vested account so benefits would accrue to each one personally.
The governor's purpose, of course, is to generate more income for people yet to come under the Social Security system.
But while Gov. Bush's proposal is meeting lots of approval across the country, Mr. Gore says that it's "risky."
It's a little surprising that Mr. Gore is taking that tack now because he earlier had gone on record as saying: "One of the single most important, salient facts that jumped out to everybody is that over any 10-year period in American history, returns on equities are just significantly higher than returns on government bonds." He was right back then.
About half of our people own stocks and are familiar with mutual funds, 401(k) accounts, individual retirement accounts IRAs. They have seen returns from them producing 7 percent as compared with about 1 percent Social Security gets for the IOUs put into its "trust fund," while general government spends the cash.
Many have come to realize that over the long term -- even including the Great Depression of 1929-1939 -- stock ownership has been economically beneficial.
Michael Tanner, director of health and welfare studies at the Washington-based Cato Institute, reports: "Even disregarding the bull market of the last few years, the inflation-adjusted return from stock investment has averaged 7.2 percent per year over the past 75 years. Compare that to an expected return from Social Security of barely 1 percent. Even investing in government bonds would provide returns two to three times higher than does Social Security. One wonders how Al Gore can call that 'risky' with a straight face.
What is risky, in fact, is Gore's proposal to do nothing about Social Security reform and burden future taxpayers with huge new liabilities.
He would not make any structural changes to the program, but use current budget surpluses to pay down the national debt. That may or may not be the best use of the surplus, but it has absolutely no effect on Social Security.
The plan would eventually save the federal government close to $230 billion per year in interest payments, money with which Gore proposes 'crediting' the Social Security Trust Fund in an amount equal to the interest savings. On paper, this would extend the life of the trust fund until approximately 2050.
But as the administration's own budget acknowledges, the trust fund does not represent real assets, merely claims against future tax revenues.
Essentially, Gore is proposing to add more IOUs to the trust fund. He then hopes that the money saved by not having to pay interest on the debt will be available to pay those IOUs when they come due."
What Mr. Gore is finding most "risky" about Gov. Bush's Social Security plan is that it is getting a positive reception throughout the country, thereby leaving Mr. Gore trailing with no real solution of his own.
For present Social Security retirees and those who expect to begin to draw Social Security checks in the next few years, and especially for younger Americans, the "riskiest" course of all is to follow Mr. Gore.
Gov. Bush proposes to create a special commission on a bipartisan basis to work out details, with economic reality rather than politics in mind. Who has a better plan?
HENCH adds: When newspapers in your own state start bagging on your politics, it's time to remake your image. Whoops! Al has already tried that a half dozen times!
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