A newer deal.

THE black standup comic Chris Rock has a standard routine about the injustice of Social Security. This, he rages, is just another white man's scheme to hold back the black man by taxing him his whole life and then withholding the benefits until after he's dead. "You don't get the money till you're 65; meanwhile, the average black man dies at 54. Hypertension, high blood pressure, NYPD--something'll get you!" Black workers shouldn't have to pay a penny of the unfair payroll tax, Rock opines as he stomps across the stage.

This isn't just another liberal trying cynically to inject race into the policy debate. It turns out Chris Rock has got it about right. Blacks really do get the shaft from the Social Security system. The average life expectancy of a black man is lower than the Social Security retirement age--and many "reformers" want to raise that age still further.

Most Americans realize that the Social Security system is like the Titanicheaded toward the iceberg. Even the Social Security administration's own accountants admit that the long-term unfunded liability of Social Security is $8-10 trillion, a much larger financial black hole than even the national debt.

Around the year 2016, the retirement system will be in deficit and in each succeeding year that deficit will mount. By 2038, about the time most Generation X-ers will be planning to retire, the Social Security system will be insolvent. Retirees will reach into the federal government's bank vault and find nothing but worthless IOUs.

Even if the program weren't about to capsize financially, there is a bigger problem. The retirement program is a rotten deal for workers. A recent Cato Institute study found that for most groups of young workers, Social Security offers on average a 1.5 percent annual rate of return on the dollars "contributed." As the accompanying chart shows, even a relatively risk-free long-term corporate bond gives a guaranteed 3.5 percent return. The long-term rate of return on stocks is around 7.5 percent.

For black men around Chris Rock's age, the rate of return from Social Security is slightly negative: In other words, black men, on average, would be slightly better off if they were able to keep their payroll-tax dollars and stuff them under their mattresses. For many black and Hispanic working couples, the rate of return is less than 1 percent.

George W. Bush is promoting a Social Security modernization plan that would reduce the long-term national debt by trillions of dollars; reduce income inequality; allow working-class Americans to retire with personal nest eggs that would increase their financial wealth and security; and help save the Social Security system from insolvency. This reform plan would also increase by tens of millions of Americans the ranks of the ownership society. Rather than 52 percent of Americans owning stocks and bonds, the Bush plan would increase that share to 80 or perhaps even 90 percent.

Most Democrats in Congress complain that this is a risky scheme that will destroy Social Security. Not so the late, great Daniel Patrick Moynihan, the godfather of Social Security and a proponent of what President Bush has proposed. Moynihan believed that with personal investment accounts most workers would accumulate half a million dollars of wealth over their working years. He once argued that we need a retirement system that "allows working people to end their lives not just with a pension and health-care benefits, but with some wealth. Half a million dollars from a thrift savings plan is a lot to someone who's been working for pay by the hour his whole lifetime. And the doorman will have a half million dollars, not just the fellow who lives in the penthouse suite."

Perhaps the Democrats fear that once low-income workers accumulate so much wealth, they won't be Democrats anymore. Risky indeed!

Social Security's Historically Low Returns

Long-Term Real Stock Returns                    7 to 7.5%
Long-Term Real Corp.-Bond Returns               3 to 3.5%
Promised Social Security Returns                1 to 1.5%
Single Black Man (Low Income) Social Security       -0.5%
  Returns

Note: Table made from bar graph.