Social Security In Flux At 70
Debate Shifts From Solvency to GOP's Plan for Accounts
By Jonathan Weisman
Washington Post Staff Writer
Sunday, August 14, 2005; A01
Seventy years ago today, President Franklin Delano Roosevelt signed the law that created the Social Security system, but this year's great debate over the program's future has all but left behind President Bush's goal of maintaining the system's solvency through the baby boom's retirement.
Instead, the battle lines have shifted to a House Republican plan to establish private investment accounts out of Social Security's cash surplus, a plan that even its advocates say would do nothing to improve the program's financial outlook.
Opponents of private accounts will be out in force today, with 131 events celebrating Social Security's anniversary, including birthday balloons on the Mall and the distribution of 50,000 "birthday cards" laying out opposition to the latest version of a Social Security restructuring. On Friday, James Roosevelt kicked off events at a rally in front of his grandfather's memorial.
Bush administration officials are also fanning out this weekend to make the case that the nation can best honor the program by accepting the president's prescriptions for its future.
But Republican lawmakers -- and even pro-Bush lobbyists -- concede there is very little momentum left for the steps needed to secure the system's fiscal health.
"One way or another, everyone's lost sight of why we're here," said Derrick A. Max, executive director of the business-backed Coalition for the Modernization and Protection of America's Social Security. "That's part of my angst with this whole birthday celebration."
To be sure, House Ways and Means Committee Chairman Bill Thomas (R-Calif.) will try to craft a broad retirement security proposal next month to extend Social Security for decades, Republican lawmakers say. But a large number of rank-and-file House Republicans have made it clear they do not want to vote on any bill that cuts promised benefits, boosts the retirement age or raises taxes -- the steps necessary to extend the program's life -- if the Senate cannot pass a Social Security bill. And that is becoming increasingly clear, GOP lawmakers and aides say.
"As far as further steps toward solvency, the question is, how much further action are we going to see in the Senate?" said Rep. Eric I. Cantor (Va.), the chief deputy whip for House Republicans. "Members are rightly concerned about what's going to happen in the Senate."
Typical is the statement by Rep. Anne M. Northup (R-Ky.) outlining what she is looking for in a Social Security bill: "The plan I support for strengthening Social Security would not increase taxes, it would guarantee promised benefits, and it would make Social Security permanently solvent."
Leaders sent Republican lawmakers home for the August recess with two pages of talking points on the GROW account, or Growing Real Ownership for Workers.
"This bill is not a full solvency package," the talking points concede. "However, it will improve the solvency of Social Security by approximately two years."
That would push the date the system could not pay full benefits from 2041, as the Social Security actuaries project, to 2043. But even that modest shift is accomplished by transferring at least $610 billion in general taxes to Social Security, critics say.
Under the proposal, workers would be given personal accounts, financed by the cash surplus that Social Security will run over the next decade. Instead of that surplus going to the Social Security system in the form of Treasury bonds, it would be credited to accounts as marketable Treasury notes. After three years, those notes could be traded for private stocks and bonds.
But even at its peak in 2008, the cash surplus would not generate much more than $500 per account, a level that would dwindle to $4 per account before disappearing after a decade. Cantor said the legislation would only be a first step, which could be followed by more substantive legislation to enlarge the accounts and possibly tackle the system's financial problems.
"Clearly, I do not think the waning surplus is all that's going to go into these accounts," he said.
But other Republicans -- even some who strongly back the plan -- see more politics than reality in it. With little chance of enactment, the plan gives Republicans the ability to assert that they back dedicating Social Security taxes to Social Security, while Democrats continue to back "borrowing" that money to fund other government functions.
"I don't know of a Republican coalition opposed to spending Social Security on retirement and only retirement; I think we can win that debate," said Rep. Steve King (R-Iowa), a co-sponsor. "But the amount is so small, it's more symbol than substance."
Rep. Ray LaHood (R-Ill.) called it "a smoke-and-mirrors thing."
That perception has created new headaches for the GOP leadership. A large bloc of Republicans will not vote for any bill that cuts benefits; at least half a dozen Republicans have said they will not vote for a bill that does little or nothing for solvency.
"Leadership has decided nothing's going to happen on Social Security. They don't see a way out of the box, so they're looking for something that gets them politically off the hook but doesn't cause them too much political grief," said Rep. Jim Kolbe (R-Ariz.), one of the first proponents of a Social Security plan similar to Bush's.
He said the GROW account proposal is simply a way "to wash their hands of it," adding that he and others do not want to participate.
"It's an exit strategy," Kolbe said. "My view is, I'm not looking for an exit strategy. I want a solution."
Cantor called that unfair. Thomas's bill will include major provisions to shore up private pensions, boost retirement savings outside of Social Security, and possibly make permanent the 15 percent tax rate on capital gains and dividends that passed in 2003 but is set to expire after 2008. A substantial boost to overall retirement savings would cushion the blow if Social Security had to cut back benefits in the coming decades to match dwindling tax revenues, Cantor said.
LaHood, who maintains close ties to his Illinois Republican colleague J. Dennis Hastert, the House speaker, said House leaders know they do not have the votes to pass the GROW account yet, but under White House pressure they have committed themselves to a vote, in late September or October.
"There's an awful lot of work that will have to go on before there's any vote on Social Security," LaHood said.
For their part, Democrats are not budging from their position that they will not discuss any solvency proposals until Republicans renounce private accounts carved out of Social Security taxes.
"Democrats stand ready to address the challenges facing Social Security's solvency," House Minority Leader Nancy Pelosi (D-Calif.) said in a statement marking the 70th anniversary, "but this cannot begin until Republicans begin talking about ways to make Social Security stronger, not weaker."
Instead, Democratic allies are moving to tie the House plan to Bush's ideas, which they think have been roundly rejected by the voters and their congressional representatives. Democrats concede that Republicans have hit on a popular argument for their new plan, that Social Security taxes must be walled off from lawmakers who otherwise would use them for other purposes.
But Brad Woodhouse, a spokesman for the anti-accounts coalition Americans United to Protect Social Security, said the GOP is starting from a deep hole.
"The public does not trust the president or Republicans in Congress to deal with Social Security in a way they like," he said. "It's going to be a lot easier for us to make the case that the bill they're proposing is a privatization bill than for them having to make the case that they're protecting the Social Security surplus." |
