Posted on 02/04/2003 8:18:54 AM PST by Isara
The Dow has been down from its highs above 10,000 for well over a year. It now hovers around 8,000, and any new bull market still seems far off.
For that reason, the White House isn't pushing partial privatization of Social Security. Without a growing market, it seems too risky.
Even private account fans say expanding IRAs and 401(k)s may be the best they can hope for now.
That may be a mistake, according to a new study by pollster John Zogby and the Cato Institute. It found the appeal of private accounts does not rise or fall with the markets. Even now, the idea has strong support.
"There is no correlation between support for individual accounts and stock market performance," the study claims. "The growing support for individual accounts in the late 1990s was not the result of the bull market."
The study notes that during the nine periods of market decline in the last five years, support for private accounts fell only three times. And on at least three occasions, support dipped somewhat even as the markets rose.
Privatization Support
The findings were based on a study of opinion polling done by Zogby and other companies over the last five years. The study found consistent support - as high as 68% in July - for private accounts.
"In fact, in many ways Enron even helped the pro-privatization people," Zogby told IBD. "It made people say: 'We don't want anybody controlling our money. We don't want venal CEOs or government bureaucrats involved.' "
Support varies, of course, depending on how the question is phrased. The Zogby/Cato study mostly used polls with simple yes/no questions on favoring accounts. Critics contend that's misleading.
"People support partial privatization of Social Security until a question is asked that gives them a sense of the pros and cons," said Faye Cook, head of Northwestern University's Institute for Policy Research.
But even when the query is phrased to imply that private accounts are highly risky, a July poll found that 41% still favored them. The number drifts back to the center when Social Security's stability is raised.
"We did a poll like that where we asked which is riskier: the current system, which may not be able to pay out benefits, or the markets, because they could go up or down," said Michael Tanner, head of Cato's project on Social Security Choice. "That one breaks about 50-50."
Oldsters Unsure
The ones most likely to favor private accounts are those 18 to 49 years old. Their support runs 70%-80%.
The 50-and-over crowd is skeptical, though that, too, is slowly declining. A poll last July found 64% of those ages 54-60 and 54% of those 65 and up favored private accounts.
What makes the younger crowd favor private accounts? It's not an animus against government programs. Most of them like Social Security. They just wonder if it will be there when they retire.
"Although there is risk in private investments, polling results have consistently shown that Americans also perceive risk in Social Security," the study says. "(They) are not confident that that they will realize an adequate return on the taxes they have paid."
They have reason to worry. The Social Security trustees have warned for years the growing senior population is straining the program's finances, a point rarely noted in opinion polls. The trustees now predict that costs will outstrip revenue by 2017.
That's one factor behind the growth of 401(k)s and individual retirement accounts. In 1980, only 6% in a Roper Poll listed them as a source of retirement income. By 2001, 45% did.
"As people invested more in the '80s and became more comfortable with what markets were, support (for private accounts) went up," Tanner said.
The growth of this "investor class" is affecting public opinion.
One poll says 41% would expect higher returns from private accounts than Social Security. Only 16% feared their benefits would fall. Another 31% saw no difference.
Another edge the accounts hold over Social Security is that individuals would control them, not government.
Zogby found the top reason (39%) for supporting private accounts was having control over the money. The second reason (26%) was concern Social Security won't pay promised benefits. Other reasons included a possible higher return (16%) and building a nest egg for heirs (14%).
More Rules? No Thanks
Any plan for private accounts with strict federal rules to regulate investing isn't likely to have much appeal.
"Support for privatization declines dramatically when questions are worded to suggest that the government, not individuals, would be responsible for investing Social Security funds," the study notes.
Yet Zogby warns not to overestimate the appeal of private accounts. Many seniors still oppose them, and they still vote in larger numbers than younger voters.
"I would say the program has potential among voters, but two conditions have to be met," he said. "You have to answer the hard questions - which I think are answerable - and you have to create a sense of urgency for it. Bush hasn't done that."
I wonder whether they looked at the opinion in correlation with Democrats' demagoguery, including the media's, of course.
Earth to Faye: there ARE no cons. The very idea of private accounts means personal OWNERSHIP of the assets. As they say, a bird in the hand (real ownership) is worth two in the bush (the government IOU).
And they keep quite when we are freezing cold this winter.
Heck, putting the money in cD's, bonds, even savings bonds would provide a 30-year horizon return that would dwarf any return under the current system.
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