Carnahan message is flawed

By Jerry Heaster

KANSAS CITY -- If Jean Carnahan retains her Senate seat in November's election, her victory will come despite her opposition to Social Security privatization, not because of it.

During a recent visit to Kansas City, Carnahan reiterated the tired old canard equating privatization to gambling America's retirement security on a "risky" stock market. Most thinking Americans should be able to see through such childish deceit.

The proposal to allow American workers to divert a portion of their Social Security taxes into self-directed retirement accounts not only would be entirely voluntary, but also would offer myriad investment choices beyond stocks. In this regard, it would be no different than traditional individual retirement accounts or 401(k) retirement plans.

As for those worker-investors who chose to invest in stocks, the odds of a successful outcome would be very much in their favor. Despite the ups and downs of the market over time, the average return from stocks during the 20th century was far superior to any other investment.

Even those who have taken significant losses in the current bear market are still ahead of the game if they've been steady investors in the broad stock market over the past 10 to 20 years.

Opponents of privatization also like to scare older Americans by implying that it would threaten the system's ability to sustain benefits at current levels. This contention, too, is without merit.

Social Security has been taking in much more than is needed to fund benefits. Diverting some of the excess taxes from federal coffers would merely allow workers to invest it for their own benefit rather than having Washington spend the surplus and pretend it's being saved to finance future needs.

The reason opposition to privatization is a political nonstarter is because most Americans apparently understand that Social Security privatization is a worthwhile approach to keeping the system viable.

A recent poll conducted for the Cato Institute by Zogby International showed nearly 70 percent of those surveyed supporting the proposal to allow workers to invest part of their Social Security taxes in personal retirement accounts. Not surprisingly, the younger the respondent, the greater the level of support for privatization.

This is a rather remarkable result given the stock market's horrendous downturn and growing revelations of corporate malfeasance at the highest levels. The response is understandable, though, because opposition to privatization rests on the assumption that political leaders will do a better job of managing retirement needs than those in private financial markets.

Another implausible assumption is that Social Security will deliver a safer and better return than private markets. In reality it's likely today's youngest workers will suffer negative returns if taxes must be raised to sustain benefits at current levels as pensioners increase and the number of taxpayers supporting them declines.

Opponents of privatization are those who favor keeping the citizenry tied to the government's apron strings. They don't trust the great unwashed to use good judgment and they don't trust the world's strongest economic system to work to everyone's best interests.

Jerry Heaster is a columnist for The Kansas City Star.