An Email Prior to the Current Bush Adminstration

From: john johnson


Questions about Social Security
by Walter E. Williams

Walter E. Williams is chairman of the Economics Department at George
Mason University and a Cato Institute adjunct scholar.

Liberal Democrats in Congress and Bill Clinton love to attack
Republican proposals for Social Security reform. In their quest for
votes, they stoke the fears of older Americans by telling them that
Republicans want to destroy Social Security by allowing Americans
choices in providing for retirement. Most Democrats and some
Republicans rank Social Security with God, motherhood and apple pie.

Few people know that about 5 million Americans employed by state and
municipal governments do not pay into Social Security. Under the
provisions of the 1935 Social Security Act, state and municipal
governments could opt out. This Social Security loophole was closed
in 1983; however, Congress permitted those 5 million employees, as
well as about 100,000 clergy, to remain exempt from paying into
Social Security.

Part of President Clinton's plan to "save" Social Security, and
championed by Sen. John Breaux, Louisiana Democrat, is to force
previously exempted employees into Social Security. If 5 million more
workers are forced into the system, it would bring in an estimated
$11 billion over five years. Instead of Social Security collapsing in
2030, it would collapse in 2032 and there'd be 5 million more Social
Security obligations. Mr. Clinton and Mr. Breaux's proposal is
standard for any Ponzi scheme - to keep the scheme going, you have to
round up more participants.

Last April, 12 senators, including five Democrats - Dianne Feinstein
and Barbara Boxer, both of California; Christopher Dodd of
Connecticut; Richard Durbin of Illinois; and Edward Kennedy of
Massachusetts - descended on the White House to demand President
Clinton not support forcing 5 million of their constituents into
Social Security. They warned of the adverse impact on employees in
terms of lower rates of return and lost flexibility.

J.T. Young, chief economist for the U.S. Senate Republican Policy
Committee, points out a real-life example of the inferiority of
Social Security compared to municipal pensions. San Diego city
employees are required to put at least 3 percent of their salary into
a pension plan (and may contribute up to 7 percent). Say a worker
with a constant salary of $32,000 puts a minimum of 3 percent of his
salary into a defined-contribution plan that goes into a mutual fund
paying an annual rate of 7 percent. Upon retirement, that worker will
have $293,385 in constant dollars. Such a return is far superior to
Social Security's zero to 2.5 percent rate of return.

If currently exempt workers are forced into Social Security, they'd
also lose the flexibility of their municipal pension plans. Municipal
pension plans typically award partial benefits for partial
disability. Social Security provides benefits only when the
individual becomes totally unemployable. People in high-pressure jobs
like police and firefighting sometime require early retirement. Under
Social Security, retirement benefits are not available until age 62.
It doesn't take a rocket scientist to figure out why municipal
employees don't want to be in Social Security.

But what are we to make of Democrats who criticize Republicans for
proposals that would begin the process of allowing American workers
to find a deal better than Social Security while at the same time
fighting to keep their 5 million constituents from being dragged into
the Social Security rat hole? At best, they're a little more than
forked-tongue scoundrels.

When politicians boast to you about the wonders of Social Security,
you should ask them:

"If Social Security is so wonderful, how come people have to be
pulled kicking and screaming into it? If it's so wonderful how come
you're petitioning Clinton to spare your municipal employee
constituents from being pulled into it?" I bet they will fork you
gibberish for answers.