Sorting Through Misinformation

October 25, 2002

In the National Review, contributing editor Tom Nugent deconstructs myths popularized by those opposed to private accounts, "Over the weekend, the local paper, the Island Packet, presented the view of both candidates on this subject. As an economic conservative, I found [South Carolina Democratic candidate for Senate Alex] Sanders's position to be of some interest. He brings to light some of the profound misunderstandings that select politicians have about the free-enterprise system:

'"What a terrible idea investing even a portion of Social Security funds in the stock market would be . . . the volatile and highly uncertain nature of common stocks has become readily apparent in the last four years, particularly in the last six months. The scheme to allow a part of Social Security to be invested in the stock market is dangerously deceptive.'"

"Why is investing in America via the free-market system a 'terrible idea' or a 'scheme'? Just because a short-term sell-off in the stock market provides nay Sayers with fodder, the long-term returns of the market demonstrate that stocks make an excellent investment alternative…If individuals are given a chance to invest in the stock market when they are young, they will have accumulated enough wealth in a private account that they won't have to worry about putting bread on the table. As a matter of fact, any money saved in a private account would be their money. They could withdraw more or less depending on their own financial circumstances. Under the current system, it is impossible to take more money out when you need it; you're stuck with one maximum monthly payment — no matter how much you or your company put in."

He emphasizes one of the main reasons to create private accounts, "To the extent that historical stock-market returns are the rule rather than the exception, future gains from private accounts would be yours too keep — and could be used to take care of your family in the way you see fit. In the current Social Security model, if you die, all of the hard-earned money that you have put into the system, along with your company's contributions, will disappear. Now there's a scheme if there ever was one."

He concludes, "In the final analysis, Alex Sanders provides no viable ideas to solve the inevitable Social Security crisis. He merely suggests the appointment of a commission to figure things out. His criticism of his opponent's ideas flies in the face of historical experience."

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