Bush Social Security panel finalizing proposals to overhaul system, allow stock investment
Friday, November 30th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ President Bush's Social Security commission is finalizing proposals to shrink benefits for most future retirees while allowing them to invest part of their payroll taxes in the stock market.
The commission also planned Thursday to include a less controversial option in their report _ allowing personal investment accounts without altering traditional benefits. But they warned that wouldn't fix Social Security's financial shortfall, as their other two proposals are designed to do.
``There's no painless way to do it and there's no quick way to do it,'' co-chairman Richard Parsons said.
Opponents of private savings accounts were quick to reject all the ideas. ``To pay for privatization, the commission is now proposing serious benefit cuts,'' complained Rep. Robert Matsui, D-Calif.
President Bush set up the Commission to Strengthen Social Security to recommend how to set up personal savings accounts without raising taxes or cutting benefits for current or near-term retirees.
The commission plans to report to Bush in December, but its members acknowledge the issue is unlikely to move forward in Congress before the 2002 elections.
White House press secretary Ari Fleischer said Thursday that overhauling Social Security remains an important priority of the president, although it ``may take more time'' because of projected budget deficits.
``The timing is an issue that has to be discussed with the Congress, but it still must be done,'' Fleischer said.
The only proposal that would keep Social Security afloat without injecting more government money would significantly change the way benefits are calculated, tying them to inflation instead of growth in wages beginning in 2009.
That means benefit checks would grow more slowly.
``Nobody's talking about cutting benefits,'' said Parsons, co-chief operating officer of AOL Time Warner. Instead, the options would ``slow down the rate of growth,'' he said.
Under this plan, workers would have the option of investing 4 percent of their wages in a personal savings account, with their benefits reduced by this amount plus 2 percent annual interest.
Most workers, even those who invest in personal accounts, would receive less retirement money than the current system promises. But the commission argues that the retirees would get much higher benefits than the current system could actually pay, because it is going broke as the U.S. population ages.
Under another proposal, a less dramatic change in the benefit formula would adjust Social Security checks downward to take into account longer life expectancy, beginning in 2009.
It would also require a mix of other adjustments, such as incentives for postponing retirement, and require a few billion dollars per year in additional government spending.
Under this ``pay to play'' plan, workers would have to invest an additional 1 percent of their wages before being allowed to direct 2.5 percent of their payroll taxes into personal accounts. Tax credits would help low-income workers come up with the starter money.
Workers who added their own money to the pot could expect to end up with even more retirement funds than under current formulas, said the commission's executive director, Chuck Blahous.
Under any of the plans, ``benefits for individuals will be higher if we create personal accounts than if we don't create them,'' Blahous said.
Both of the overhaul proposals would include benefit increases for the poor and widows, so that Social Security could be counted on to keep even retirees with low lifetime wages out of poverty.