The House began its first formal work on restructuring Social Security yesterday with a hearing that featured testimony from the head of the investigative arm of Congress, who issued several warnings about the individual accounts proposed by President Bush.
House Republican leaders also received a new report from their consultants showing that focus groups had found "great levels of concern about the financial risks associated" with such accounts, which would allow younger workers to invest part of their payroll taxes in tightly regulated stock and bond funds.
David M. Walker, a Republican who as U.S. comptroller general is head of the Government Accountability Office, told the Ways and Means Committee that allowing future retirees to manage part of their Social Security contributions could "exacerbate" the system's solvency problems. He cautioned lawmakers about the risk, debt and transition costs that the accounts could produce.
But Walker said the accounts can be part of a solution to the retirement system's "current unsustainable fiscal path" and added that a failure by Congress to rewrite the law swiftly "will gradually erode, if not suddenly damage, our economy, our standard of living and ultimately our national security."
"Social Security does not face an immediate crisis, but it does face a large and growing financial problem," Walker said. He titled his presentation "Early Action Would Be Prudent" and said that restructuring quickly would "make the necessary action less dramatic than if we wait."
Ways and Means Committee Chairman Bill Thomas (R-Calif.), who has said he wants to consider a broad range of solutions that might include changes to the tax system, opened the hearing by declaring that population changes mean the current program "is not sustainable based upon the old method of financing."
Thomas said Bush's leadership on the Social Security issue, which was part of his reelection agenda, "has given us a unique opportunity to assess government institutions that worked, but will not work in the future."
Signaling that he may conduct a much broader review than Bush suggested, Thomas noted that retirement security does not depend on Social Security alone but also includes personal savings, pensions and "health care, especially long-term and chronic care."
Rep. Charles B. Rangel (N.Y.), the committee's top Democrat, accused Republicans of an effort to "polarize the young against the old." Rep. Sander M. Levin (Mich.), the top Democrat on the Social Security subcommittee, said his party "cannot accept the notion that you safeguard Social Security by undermining it."
In addition to Walker, the committee heard from two professors who are public trustees of the Social Security and Medicare trust funds, John L. Palmer and Thomas R. Saving. They said in a written statement that "the financial challenges posed by Medicare are expected to occur sooner, grow much larger, and otherwise be more difficult to address than those facing Social Security."
Thomas confined the hearing to the problems Social Security is facing rather than a detailed examination of potential solutions. But some lawmakers are getting antsy. Sen. Mel Martinez (R-Fla.) said yesterday that he will endorse a proposal by Sen. Chuck Hagel (R-Neb.) that includes raising the retirement age for full benefits from 67 to 68.
Also yesterday, strategists from the Tarrance Group and Public Opinion Strategies gave House leaders a 17-page summary of focus groups they had conducted on Social Security.
"While the electorate has developed a cursory understanding of the fact that there are major problems with Social Security," the report said, "they still do not possess enough detailed information about the nature of the problem to embrace Personal Retirement Accounts as part of the reform effort."