The Social Security "lockbox" is back, with
a reckless twist.
In the late 1990s, politicians from both
parties tried to curry favor with seniors by pledging to safeguard surplus Social Security money in a so-called lockbox. The
idea was that, instead of Congress spending workers' excess Social Security contributions on moving sidewalks in Altoona and
fruit-fly research, lawmakers would lock away that retirement money in a safe place beyond the reach of deficit-spending pork
barrelers.
But the lockbox idea never went anywhere,
because neither party was serious about limiting its options at budget time.
Now some lawmakers are essentially reviving
the lockbox concept, this time as a means to jump-start President Bush's plan to create private accounts in Social Security.
It's a bad idea intended to rescue a worse proposal, one that the public has rejected.
A House bill proposed by Rep. E. Clay Shaw
Jr. (R., Fla.) and others would "wall off" excess payroll taxes in the Social Security Trust Fund to create individual accounts
for 110 million Americans who pay those taxes. This idea is essentially a paper transfer from a general IOU to individual
IOUs, because in the real world the deficit-addicted government would still be spending the surplus payroll taxes until 2017,
when the Social Security Trust Fund is projected to start running a deficit.
A similar bill in the Senate, sponsored
by Sen. Jim DeMint (R., S.C.) and supported by Sen. Rick Santorum (R., Pa.), would require the transfer of nearly $1 trillion
in general tax revenue to the Social Security Trust Fund. The transfer would be needed to avoid hastening the date on which
the Social Security system goes broke.
The government would also need to borrow
money to make up for the Social Security funds now being used to run the government; that would worsen the nation's financial
picture by increasing its debt by about $860 billion over 10 years. If the system had been in place this year, a deficit of
roughly $370 billion would have increased to about $540 billion.
"To call it pointless would be a
compliment," said Jason Furman, a senior fellow at the left-leaning Center for Budget and Policy Priorities in Washington.
"It just moves money around."
Worse, this half-baked plan still does not fix
the long-term red ink in the Social Security system, which is projected to run a deficit of more than $4 trillion over the
next 75 years. House GOP leaders say they will unveil a plan to address Social Security's long-term solvency in the coming
weeks. By first trotting out a new way to create private accounts, they are demonstrating how little they care about fixing
the core of a system that has worked so well for generations. This page has shown how traditional Social Security can be fixed
with a fair, five-point plan (http://go.philly.com/socsecplan).
The size of the private accounts that would
be created under the latest GOP plan are smaller than those envisioned by Bush. And in theory the contributions to these private
accounts would end in 2017, when the Social Security surplus is used up. By then, the costs of administering these accounts
would be high enough to make a compelling argument for keeping the accounts growing by diverting more payroll taxes into them.
It is the foot in the door to Bush's plan to change Social Security from an intergenerational system that benefits the common
good into a risky, every- worker-for-himself privatized program with winners and losers.
This latest proposal, bad as it is, has
political momentum in Congress...
Editorial,
Philadelphia Inquirer, Jun. 27, 2005
GOP's
new ideas for private accounts
To understand what's behind the new Republican proposals on Social Security - which would use the system's current
operating surplus to launch a personal account system - it helps to look at the polls.
In survey after survey, by overwhelming margins, the
American people have said they don't approve of President Bush's handling of Social Security. Nor do they support his proposal
to pare down benefit increases for the middle-class and the wealthy.
But in some polls, depending on how the question is posed,
people are pretty evenly divided on the underlying question: whether they would like to put some of their payroll taxes into
individual accounts.
And anyone who has attended a town meeting on the subject
knows that the idea of dedicating Social Security taxes to Social Security benefits is popular in the extreme.
Now, in hopes of getting something done this year either
substantively or politically, GOP leaders have taken those two elements and combined them in a single package.
"This is a small thing that we can do," said Sen. Rick
Santorum (R., Pa.), a sponsor of the Senate bill, called the Stop the Raid on Social Security Act. "But it's an important
thing."
For the GOP - and perhaps for the White House, which
has yet to sign on - this maneuver offers a potentially attractive exit strategy from a policy initiative that has not gone
well. Consider the possibilities.
Enactment of the Senate bill or the slightly different
House version would establish private accounts as part of Social Security. For advocates of the concept, that would be a huge
achievement.
From a Republican point of view, the alternative isn't
so bad either.
Assume Democrats block the measure. Then, in the 2006
elections, Republicans would try to paint them as opponents of protecting the Social Security surplus. Doing so might help
offset the advantage Democrats have gained this year through unified opposition to what they call the "privatization of Social
Security."
Democratic legislators, though, don't seem to think opposing
these bills carries much political risk.
Said Sen. Charles E. Schumer (D., N.Y.): "The Republicans
are playing a shell game. It doesn't matter whether they are privatizing Social Security using payroll taxes or using the
Social Security surplus, it is still wrong."
And compared to where the debate was a few months ago,
the dialogue generated by these bills sounds small.
When he launched his Social Security offensive, President
Bush said his aim was a permanent, sustainable fix, one that would prevent the system from ever becoming unable to pay promised
benefits.
But as the weeks passed, he acknowledged that the voluntary,
private accounts he favors wouldn't cure Social Security's long-term financial problems, and he proposed scaling back benefits
for the wealthy and the middle class to accompany them.
The new Republican approach, as its backers readily
admit, doesn't deal with enhancing the system's bottom line. It's not about any of the tough options, such as reducing
promised benefits, raising the retirement age, or making more of a higher-wage worker's income subject to payroll taxes...
So what are the Republicans proposing to do with the
Social Security surplus? Here's the basic concept, as laid out in the Senate version.
Today, the federal government takes the Social Security
surplus, spends it, and issues special bonds for the amount. Those bonds, representing the money the government is obligated
to repay the system, go into the Social Security Trust Fund.
Under the Senate bill, the government would no longer
be able to spend that money. Instead, the excess of payroll taxes collected over benefits paid out - which was $60 billion
last year - would be put into standard Treasury securities. The securities would be used to start personal retirement accounts
for younger workers.
How this would affect the financial outlook of Social
Security, which is projected to stop running surpluses in 2017, is a matter of some dispute. But the federal budget, deprived
of Social Security money, would go deeper into deficit, according to an assessment of the bill by Stephen C. Goss, the system's
chief actuary.
Said Robert Greenstein, executive director of the liberal
Center for Budget and Policy Priorities: "In short, the proposal would fail to strengthen Social Security's finances while
adding to already-spiraling deficits and debt and carrying substantial administrative costs."
The Republican idea relies heavily on a proposal made
three months ago by Alex J. Pollock, a fellow at the American Enterprise Institute, a conservative Washington think tank.
Issuing government bonds directly to individuals, he
said, allows introduction of personal accounts while deflecting such divisive matters as transition costs and the risks of
stock-market investing.
"One of the great advantages of this approach is its
simplicity," Pollock said last week.
Simplicity is not a concept invoked often in the Social
Security debate. In the end, it may not apply here, either.
By
Larry Eichel, Philadelphia Inquirer, Jun. 27, 2005
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