Ed Lorenzen, Stenholm's legislative assistant, says that Stenholm regards the NCRP as having "helped him think through some of the details of this, such as the costs of different options and the impact they might have. He ended up learning a lot."

Also on the NCRP was Cato Institute adviser Mark Weinberger, an influential lobbyist with a firm called Washington Counsel. Among Weinberger's present and former clients: Merrill Lynch; Goldman, Sachs; the Bond Market Association; and the powerful ICI. Weinberger pooh-poohs the idea that Wall Street is scheming to profit on Social Security privatization, calling it a myth manufactured by the media. "Besides," he says, "I don't think that the financial community speaks with one voice." Many companies, he says, are concerned about alienating their clients, who, after all, might be offended by proposals to dismantle Social Security.

What's important about the NCRP is that its proposal for partial privatization of Social Security, released last May, was immediately translated into credible, bipartisan legislation in both houses of Congress by Breaux, Gregg, Kolbe and Stenholm. "We have put our name on a proposal that uses private markets for 2 percent of what's now going into Social Security," says Stenholm. Lorenzen, his aide, adds that "the legislation that we introduced follows the recommendations of the commission as much as possible." As with all plans for partial privatization, the NCRP's would intensify the shortfall that Social Security faces in the next century by diverting one-sixth of the system's funds into private accounts, thereby leaving even less money left over to pay for current retirees and the coming retirement of the Baby Boomers beginning in 2011. To pay for that shortfall, the NCRP proposes raising the retirement age to 70 (from the current 65, already slated to increase to 67) and instituting a sharp cut in Social Security benefits by adjusting downward the annual cost-of-living increase by 0.5 percent a year.

Part of the NCRP plan is constructed to deal with a major objection to Social Security privatization, namely, the staggering cost of administering tens of millions of private accounts that would contain only tiny amounts of money. Something like 30-35 million Americans, including part-time, temporary and low-wage employees, earn less than $10,000 a year. By putting aside 2 percent of wages, a person earning $5,000 would save just $100 in a private Social Security account and the $10-$20 cost of maintaining that account would eat up a significant chunk of the person's savings. (Maintenance costs are relatively much higher for small accounts.)

To get around this problem, one recognized not only by critics of privatization but by many Wall Street experts who fret about having to manage so many small investors' accounts, the NCRP proposes to bundle the small accounts into a single government-owned investing corporation that would do business with perhaps a dozen money-management firms, from Vanguard to Merrill Lynch to Chase Manhattan Bank, which would bid competitively to qualify. Though such an arrangement might be only marginally profitable for Wall Street, and then only for the handful of firms chosen to manage the government-supervised accounts, as the accounts grew, individual account holders might be offered the choice of setting up and managing their own accounts with private securities firms.

While the financial industry has been busy funding the theoretical underpinning for Social Security privatization, it has also continued its traditional heavy donations to political parties and campaigns. During the '98 election cycle, securities and investment companies contributed more than $23 million, almost evenly divided between Republicans and Democrats. (In all, including insurance companies, banks, finance and real estate companies, more than $98 million was funneled into the 1997-98 election campaigns, both totals outpacing other industries' contributions.) In addition, lobbying itself was big business for the securities and investment company sector; in 1997 alone, it spent more than $31 million on Washington lobbyists. Just four organizations accounted for nearly half that total: SIA, with $5 million in lobbying expenses; ICI, with $3.7 million; Merrill Lynch, with $2.9 million; and the Bond Market Association, with $2.4 million.

Of course, as powerful as this apparatus is, Wall Street has hardly begun to mobilize its troops for the hand-to-hand combat that will be required to succeed in privatizing Social Security. A survey of Washington lobbyists for securities and investment firms and their allies reveals that most, though not all, are content to keep their powder dry. Part of their motivation for waiting is that a highly visible campaign by the industry would provide the enemies of privatization with a juicy target. "I think they've got to walk a fine line," says a Capitol Hill staffer working for Social Security privatization. "And I think that's smart. But they're on board." A key Democratic staffer says, "Early on, ICI did go around. Their lobbyist, Mike Stern, was kind of feeling people out. But they're not lobbying now."

Indeed, two years ago Stern was actively engaged in trying to raise the profile of Social Security privatization on Capitol Hill, but he was reined in when articles began to appear highlighting ICI's role. "The institute has no ongoing activities in regard to Social Security privatization," says ICI spokesman John Collins. "And we are not salivating over the idea or anything like that." But ICI is on record favoring at least some privatization and, says Collins, "If you allowed individual accounts at something like the 2 percent level that's being talked about, it would be something that the institute would support."

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