Bush pushes Social Security plan

By Ron Hutcheson and William Douglas

Inquirer Washington Bureau


WASHINGTON - President Bush yesterday signaled his determination to overhaul Social Security, even if it means piling up huge new government debt to pay for the transition to a partially privatized system.

Underscoring his commitment to the issue, Bush invited 16 top congressional leaders - including eight Democrats - to the White House to promote his plan to let workers invest part of their Social Security taxes in the stock market and other investment vehicles.

The President did not provide details of his proposal, but White House spokesman Scott McClellan said Bush was willing to add to government debt to cover transition costs, which are estimated at $1 trillion to $2 trillion over 10 years.

Administration officials contend that any short-term harm from a big increase in deficit spending would be more than offset by long-term savings in the Social Security system. Independent financial experts do not necessarily disagree, but many warn that adding $1 trillion or more to government debt could be dangerous to the economy, so the details of any overhaul are of immense importance.

Under the current system, payroll taxes on today's workers pay for benefits to current retirees. Bush's plan would disrupt the cross-generation income transfer by letting workers put aside money for their own retirement. That would leave a big funding gap for retirees who depend on the current income-transfer system.

"There will be some upfront transition financing that will be needed to move toward a better system," McClellan said. "It's a savings over the long term."

Unanswered questions include how much money workers could divert from Social Security financing into their private investments, the precise transition costs and whether workers would be protected if their investments dramatically declined.

Congressional leaders, who remain wary of tampering with a bedrock government program that guarantees retirement income to some 45 million Americans, declined to step to the microphones after their late-afternoon meeting with Bush. They said Bush urged bipartisan cooperation on the issue but did not outline a legislative timetable or present details.

Despite their reluctance to talk yesterday, Democratic lawmakers are likely to give Bush strong opposition, while his fellow Republicans are expected to have mixed reactions.

"If the President has some ideas about trying to improve it, I'll talk to him," Sen. Harry Reid of Nevada, the incoming Senate Democratic leader said Sunday on NBC's Meet the Press. "But we are not going to let Wall Street hijack Social Security. It won't happen. They're trying to destroy Social Security."

The idea of increasing government debt to finance the transition to a modified Social Security system rather than finding revenues to pay for it outright also draws mixed reviews. The federal government ran a record $413 billion deficit in the fiscal year that ended Sept. 30, adding to a total government debt of about $7.5 trillion.

Administration officials have declined to estimate, at least in public, how much deficit spending would be required to pay for the transition to a partially privatized Social Security system.

"The issue is how much, for how long," said Robert Bixby, the executive director of the Concord Coalition, an organization devoted to the goal of a balanced federal budget. "You may swamp the economy with debt before there is a payoff."

Others welcomed Bush's willingness to ignore short-term deficits in pursuit of a long-term goal. Most analysts agree that the system will have to be changed in some way to deal with the tidal wave of retiring baby boomers - those born between 1946 and 1964, who number 79 million. They will begin reaching the retirement age of 62 in 2008.

Paying for change by piling up debt might avoid the need to increase payroll taxes, to cut benefits or other politically painful choices - at least in the short term.

"It's worth the transition costs," said Grover Norquist, the president of Americans for Tax Reform, an antitax group. "What you want to do is shift from the pay-as-you-go plan to one that is fully sustainable so everyone can save for the future... . Why would you put in a tax increase when you need to borrow over a fixed period of time?"

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Unless some protections are added for participant accounts in case of stock market tumbles, this is a dangerous proposition.

That's not even considering the price tag.

The devil will be in the details. I'm probably too old to participate (mid 40's) in whatever they come up with but if I were younger I would welcome the opportunity to have some say in how my SS contributions were invested.

"partially privatized Social Security system"

Sweden has been using a similar system for almost a decade now. Hopefully someone in the Bush administration asked the swedes about how it's working out.

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"When I'm in command, every mission is a suicide mission!" -Capt. Zapp Branigan
The United Church of the Latter Day Tangential Tarts

... somebody's getting another tax cut. With the 'new math' that Bush uses, that's how he manages a budget:

tax cuts for his wealthy friends = government can spend all they want on anything.

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<<Cheer up, the worst is yet to come.>>

..but check this paragraph out:

The President did not provide details of his proposal, but White House spokesman Scott McClellan said Bush was willing to add to government debt to cover transition costs, which are estimated at $1 trillion to $2 trillion over 10 years

Willing to add to the debt??? My Goodness!!! And this is sound economic policy? I guess "JENNA and NOT JENNA" would not have to worry about any SS checks or ever have to worry about this deficit. Laura ain't having any more kids so its ok to add as much debt until 2008 when we all go back to Crawford and live off our "spoils"..

it's been tried. Brazil did the same thing several years ago, and it has worked wonderfully. Galveston County opted out of Social Secruity in '91, due to a since closed loophole, and has done very well, also.

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"Victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory, there is no survival."
Winston Churchill

...George W. Bush had nothing to do with either.

Don't know if you've noticed, but nothing has been real successful that he's had a hand in.

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<<Cheer up, the worst is yet to come.>>

OpEnduring Freedom in A'stan started off really good... too bad he followed it up too soon with OpIraqiFreedom.


edit doh! this is a social security thread..oops

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"When I'm in command, every mission is a suicide mission!" -Capt. Zapp Branigan
The United Church of the Latter Day Tangential Tarts

Exactly right!

Double oops

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<<Cheer up, the worst is yet to come.>>

http://www.ncpa.org/pi/congress/pd090999a.html

Not exactly a ringing endorsement. You don't need to look overseas to see how this is a bad idea: look in your own backyard. The trend of the last 20 years of employers changing from Defined Benefit (i.e., Pension) plans to Defined Contribution (i.e., 401(k)s) plans has started to cool off in the last 5 years because people are finally starting to realize the problem: when you change the plan from a guaranteed benefit to one that's employee-controlled, and you base that new plan on investment in stocks, you inevitably increase the risk of employees losing everything and retiring with nothing. Just ask former Enron employees if they're glad they had the "ownership" over their accounts, enabling them to invest it all in Enron.

Sure, many will say, that's their own fault, too bad. But what about if another Stock Market crash occurs, eliminating the nest eggs of even those who had a balanced, diversified portfolio? You'd have millions of retirees with no social security to fall back on, and we'd be back to the elderly eating cat food for dinner.

There needs to be: (a) some recognition of the costs that this will impose and (b) some safety net for retirees in the event of a crash. Otherwise, you're screwing a whole lot of people in the name of "ownership."