TCS Daily

The Trouble with Harry

By Patrick Hynes - March 10, 2005 12:00 AM

Senate Minority Leader Harry Reid has embarked on a nationwide tour to argue against Social Security reform, especially President Bush's plan to allow younger workers to invest a portion of their income into personal retirement accounts. But Sen. Reid has a problem. His arguments constitute a house of cards erected on shifting sand. And the wind just picked up.

For starters, Sen. Reid has promised not one Democrat in the United States Senate will vote for personal retirement accounts. CQ Today reported on February 1st:

        "Not a single Senate Democrat will support President Bush's proposal 
        to divert a portion of the Social Security payroll tax to personal investment 
        accounts, Minority Leader Harry Reid, D-Nev., said Tuesday."

Most of the media have repeated Reid's assertion with uncritical cheerleading. And yet, no fewer than six Senate Democrats have deliberately left the door open to PRA's. For example:

  • Sen. Kent Conrad from North Dakota: "there is a kernel of a good idea with individual accounts."

  • Sen. Tom Carper from Delaware: "I don't believe we as Democrats should have a knee-jerk opposition to private accounts."

  • Sen. Joe Lieberman (D-CT) is in open negotiations with Sen. Lindsey Graham (R-SC).

Forced unity will not work. At some point, Reid will have to change direction.

Other Democratic arguments are twisting in the wind, as well. We are told in bullet point after bullet point that personal retirement accounts are just a scheme to line the deep pockets of Wall Street. The non-partisan watchdog website put the lie to this item with the following discovery:

        "New information turned up by shows that the type of 
        private Social Security accounts being proposed by President Bush would 
        yield very little profit to the securities industry, contrary to persistent 
        claims of a potentially huge 'windfall' to Wall Street.

        "What we have discovered is that the model for Bush's accounts -- the Federal 
        Thrift Savings Plan for federal workers -- actually paid securities firms a net 
        total of only 16 cents for every $10,000 in workers accounts. The TSP had 
        refused to make that information public -- until now. It shows that fees 
        actually being paid to Wall Street are hundreds of times smaller than some 
        critics had assumed."

The exposure of this legerdemain last week led to the yanking of one liberal group's advertisement in Louisiana.

The trouble with Harry and his anti-reform allies is that they have popped the victory cork too soon. They are celebrating after the first 100 meters of a marathon. To run the risk of dangerously mixing my metaphors, the two sides' approaches to this debate are rather like the ways they view the markets, which, circularly, have shaped their divergent perspectives. Reid and company watch and react to the ups and downs of the debate on a day-to-day basis, judging their gains and losses in twenty-four hour cycles. President Bush, on the other hand, is looking to retire this issue well down the road, like say, this fall. So Bush is investing his political capital at what seems like a loss, but he's really dollar-cost averaging. Bush is gobbling up a bigger share of the issue, which will pay bigger returns in the long run.

It didn't have to be this way for Democrats in Washington. Sen. Reid himself once understood the power of markets to improve Americans' retirement security. He told Fox News Channel in 1999, "Most of us have no problem taking a small amount of the Social Security proceeds and putting it into the private sector."

His like number in the House, Nancy Pelosi saw the light, too. Of Sen. Pat Moynihan's Social Security reform bill in 1998, which included personal retirement accounts, she said, "because the economy is good, maybe the heat can be turned down and people can look at this issue objectively." At the time, she said personal retirement accounts had "some appeal." But we had a different president then, didn't we?

Sen. Reid's obstruction on Social Security has forced him into the precarious position of having to refer to the venerable Chairman of the Federal Reserve Alan Greenspan -- who supports personal retirement accounts -- as "one of the biggest political hacks we have in Washington." An ironic criticism from a man who is so desperately playing politics himself.

Patrick Hynes is a political consultant and freelance writer. He is the proprietor of the website


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