One good reason to vote for Bush

But that's only the half of it. There's no actual money in the "trust fund," only bonds the federal government has issued in return for borrowing the payroll-tax surplus to finance other operations. To draw on the trust fund for Social Security payments, those bonds will have to be redeemed -- for which, in the words of the Washington Post, "the government will have to find the money somewhere." Presumably somewhere in our pockets. Or somewhere else in the federal budget, which means squeezing other programs.

The man and woman in the street may not know the details, but they do know something is seriously wrong. In a June 1999 Gallup poll, nearly three out of five agreed that Social Security needs a complete overhaul or major changes.

In 1996, the Social Security advisory council appointed by President Clinton unanimously concluded that investing in the stock market was the only way to save the system, though it was sharply divided on how that should be done. Six of the 13 members wanted the government to invest payroll tax revenues; seven favored individual investment accounts, and five of those seven backed a plan that would allow people to put nearly 80 percent of the employee share of the Social Security tax, or 5 percent of their earnings, into private retirement savings. That's considerably more radical than Bush's plan, under which only 2 percent of earnings, or 33 percent of the employee share, could be diverted into individual accounts.

Some would go much further. The Cato Institute, a libertarian think tank in Washington (where I have an unpaid position as a research associate), champions a gradual transition to a fully private pension system based on the Chilean model. Social security privatization in Chile, launched in 1981, could be seen as tainted by its association with the Pinochet regime. Still, the fact remains that these reforms have been highly successful; they have won converts among initially hostile labor leaders and inspired several other Latin American countries, including Argentina and Mexico, to adopt similar programs. Chilean workers are required to deposit 10 percent of their salaries into personal savings accounts, managed by private investment companies that are subject to government approval and regulations prohibiting high-risk investments. An additional 3 percent goes to disability insurance. A government safety net guarantees any retiree a minimum income equal to 40 percent of average wages -- similar to the average benefit in the United States.

The real question is not whether a privatized retirement system would work better, it's how to get there from here -- how to allow workers to take their money and opt out of the state-run system while preserving the benefits due to retirees and those nearing retirement. Bush has been accused of ducking the tough issues, and it's true that he hasn't done a very good job of explaining his plan. Many privatization proponents argue that the massive infusion of money into the market would spur economic growth and boost tax revenues. If that's a little too iffy, the budget surplus offers an excellent opportunity to help pay for the transition. (It won't be cheap: economist Paul Krugman estimates that Bush would need to put aside half a trillion dollars out of the surplus to pay for transition costs.)

Meanwhile, Al Gore decries Bush's limited privatization proposal as "risky," while promising new benefits that would worsen Social Security insolvency and ducking tough questions about his accounting at least as much as Bush does. A parody of the presidential debates making the rounds of the Internet, in which Gore proposes "changing the laws of mathematics to allow us to give $50,000 to every senior citizen without having it cost the federal treasury a single penny until the year 2250," is not so far off the mark.

An article Tuesday in the Washington Post -- which has endorsed Gore and can hardly be suspected of bias against him -- points out several serious problems with Gore's approach to Social Security reform. It concludes, "Without saying so directly, Gore would have the country wait to see if the anticipated crisis in Social Security really exists." Some economists do, in fact, believe that everything will be fine if productivity growth outpaces the Social Security trustees' cautious predictions; but this head-in-the-sand approach still sounds pretty risky.

Moreover, Gore wants to draw on general revenues, not just payroll taxes, to help finance Social Security. As the Post notes, "This would place the retirement system in competition with defense, healthcare, education and other programs for possibly scarce resources. Social Security was set up to be self-financed through the payroll tax so it wouldn't be subject to such political pressures." Under Gore's plan, retirement benefits may be safe from the whims of the market but not from those of politicians. And, unlike Bush's proposal, which would also require massive short-term infusions of cash, Gore's approach would not provide a long-term solution to Social Security's structural flaws.

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