It Must Have Been an Un-Outrageous Week

September 25, 2002

Last weekend on CNN's Capital Gang, host Mark Shields criticized the Cato Institute for changing the name of its Social Security project:

"Now for the 'Outrage of the Week.' Do you remember in 2000 when candidate George W. Bush boldly advocated partially privatizing Social Security while pledging to protect the benefits of workers at or near retirement age? Well, a recession and a shrinking stock market have scared stiff Republicans now fleeing from Mr. Bush's even partial privatization plan. House Republicans officially proclaimed, quote, 'Republicans are opposed to privatization,' end quote."

"In an Orwellian abuse of the language, conservatives, including even the respected Cato Institute, insist that they're now for Social Security choice, not for dreaded 'privatization.' Yes, and war is peace."

Columnist Robert Novak replied: "I'm still for privatization."

Cato's Michael Tanner responds:

"Privatization" was originally used as a shorthand term to convey the more complicated concept of allowing younger workers the choice of remaining within the current Social Security system or choosing to invest at least a portion of their Social Security taxes in private capital assets through individual accounts, somewhat similar to IRAs or 401(k) plans. (Some also used the term to describe proposals, such as those by the Clinton Administration, to partially pre-fund Social Security benefits by allowing the government to directly invest Social Security Trust Fund surpluses in private capital assets.) It was never a precisely accurate term, but it adequately conveyed to the public the basic concept involved.

As the debate over Social Security reform developed, opponents of individual accounts adopted their own definition of "privatization," one that implied a total abandonment of any government role in the Social Security system. This may or may not have been more technically correct, but it was not what the advocates of individual accounts intended (individual account plans generally retain a large measure of government involvement, ranging from guaranteed benefit levels to investment oversight and regulation to a mandate for participation). With the meaning of "privatization" becoming less clear in the course of the debate, the term was no longer a useful shorthand for conveying the concept of individual accounts. Therefore, most advocates of individual accounts stopped using the term, preferring some variation on "Social Security choice," "Social Security modernization," "Social Security personalization," or simply "individual accounts." The Cato Institute decided that "choice" was they key concept because it conveyed the important point that the money belonged to the worker and what they did with it was their choice. After all, the project's unofficial slogan has long been "Your money. Your future. Your Choice."

Semantics aside, the concept advocated by the Cato Institute remains unchanged. There would be no changes in the program for current retirees or those nearing retirement. There would be no change in disability or survivor's benefits. Younger workers would have the choice to remain within the current Social Security system or to invest at least a portion of their Social Security taxes in private capital assets through individual accounts, somewhat similar to IRAs or 401(k) plans. Is that privatization? Yes, as we meant it 7 years ago. No, as it is currently used. In an age in which concepts must be discussed in 8-second sound bites, we choose to spend our time discussing substance, not language.

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