Model U.S. Policy After Mexico’s

They have a saying here: “Zapatero, a tus zapatos.” Or, “Shoemaker, to your shoes.” It means stick with what you do best.

And it fits the Mexican government’s decision to get out of the pension business. This past fall, Mexico said adios to its old Social Security system.

Like the pay-as-you-go prototype in the United States, the old government-run system was always struggling to get out of red ink. So Mexico switched to a privatized plan. Now, workers can invest for their retirement in stock funds.

This should be a win-win-win-win situation:

The retiree wins because the private account will ultimately grow to more than the guaranteed government benefit.

The government wins because it no longer will have to raise taxes to pay for benefits.

And the country wins because the growing pool of domestic savings will make Mexico less dependent on the ebb and flow of foreign investment.

“And for the first time, people will become informed about the money in their personal account. They can compare how they are doing with the workers next to them. This will not only change the availability of capital, but the ‘culture,”’ said Finance Minister Jose Angel Gurria in a recent interview. He predicted that once workers have a personal stake in the growth of the economy, they will save more and support growth policies. That is, become more fervent capitalists.

At the time of Mexico’s peso crisis, the savings rate was 15 percent. Now it is 21 percent, Gurria said. Thanks to the new retirement savings plan, he thinks Mexico can reach 25 percent, which could spur enough growth to create more than 900,000 jobs a year.

Mexico has the right idea. Let government pare back to the essentials and let the private sector take care of moneymaking. That’s why Great Britain privatized its pension system in 1986. The results have been phenomenal.

First, although the number of pensioners is going up, government spending is going down.

Second, the private pension funds already have almost $1 trillion worth of investments - more than the rest of the European Union together.

Third, since the change, pensioner incomes have risen by 50 percent and pensioners are no longer concentrated at the bottom of income distribution.

Australia also switched to a private system in the 1980s. The Aussies are experiencing the same success: Higher retiree incomes, lower government expenses, dramatic increase in savings. Heritage Foundation economists said that when Australia switched, it faced the same crisis that the United States does today - a government system headed for bankruptcy and profound skepticism whether it could be fixed. Little more than a decade later, Australia has the best private model in the world.

The privatization revolution started with Chile. Now Argentina, Colombia and Peru have fairly successful private pension systems. Venezuela, Brazil and El Salvador are on the way.

According to the World Bank, every country in Latin America - except Cuba - will be in a privatized system by the year 2000.

That means the United States will be in lonely company with a sinking Marxist country.

And that means that President Clinton missed what could have been his Mount Rushmore moment. Besieged by bimbo eruptions, he should have used his state of the union address to prove he could be a turning point president, like FDR.

He should have taken on the runaway entitlement programs. Having already joined the sea change to welfare reform, he could have led the parade to reform Social Security and Medicare. The outdated pay-as-you-go plans are intellectually bankrupt. They are like chain letters that get more and more expensive to keep going.

Instead, President Clinton threw more money at the old Social Security system, like tossing Tootsie Rolls to the crowd from a parade float. He said he would devote the upcoming budget surplus to “saving Social Security.”

People were so relieved to hear about something besides - blush - oral sex scandals, they applauded mightily. Weeks later, it turns out that the “surplus” will be available for only a few years and then it’s back to the same Titanic scenario.

The iceberg is out there in the dark. According to the National Center for Policy Analysis in Dallas, the tax burden from Social Security and Medicare could hit 37 percent by the time all baby boomers are past 65.

President Clinton still could turn the ship. Sen. Bob Kerrey, D-Neb., who headed a commission that endorsed a privatized system, is sponsoring a bill that would allow workers to put a percentage of their Social Security contributions into a private account. Sen. Phil Gramm, R-Texas, would be more courageous and privatize both Social Security and Medicare.

Clinton should act boldly and embrace privatization. He still could have more to show for his second term than a controversial intern program.

If not, by the year 2015, President and Mrs. Clinton will be over 65. And our neighbors in Mexico may be pointing to the United States as the country in a crisis.

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