BAKERSFIELD, Calif., March 21 -- Two of Washington's most powerful politicians -- Vice President Cheney and House Ways and Means Chairman Bill Thomas (R-Calif.) -- teamed up Monday to pitch personal Social Security accounts as a safe and smart way to shore up the 70-year-old retirement program.
The two men, who came to Congress together 27 years ago and now play major roles in shaping policy, said critics are misleading the public about the risks associated with allowing Americans born after 1950 to voluntarily divert about one-third of their payroll taxes into private accounts.
Vice President Cheney and Rep. Bill Thomas join forces on Social Security.
(Ric Francis -- AP)
"The one thing people should not be concerned about is that in creating personal accounts you are going to exercise any significant risk," Thomas said at a town hall meeting at California State University at Bakersfield. "It will be structured in a way that you can get the benefit without a serious risk of losing money."
Cheney said the performance of stocks and bonds over the course of history proves those younger than 55 should "bet on America" and fully expect to win. "In effect, what we are saying is we are going to tie your future as you retire to the overall health and function of the American economy," he said.
As part of a stepped-up White House public relations blitz for President Bush's plan to restructure Social Security, Cheney and Thomas went after AARP and other critics who charge that Americans will be gambling with their retirement if they are allowed to invest any portion of the Social Security tax in the market. Although many Democrats agree that, historically speaking, stocks and bonds have been a wise investment for many Americans, they still oppose converting a system that guarantees a set benefit into one that relies, in part, on unpredictable market forces. AARP is running ads that say Bush's plan is tantamount to Las Vegas-style betting.
With some polls showing support for the accounts slipping, Republicans are spreading out across the country to sell the Bush plan. In Arizona, Bush teamed up with his onetime presidential rival, Sen. John McCain (R-Ariz.), to put pressure on skeptical Democrats to drop their opposition and consider a bipartisan deal. "I say to our Democratic friends, come and sit down at the table [and] let's work together to save the safety net," McCain said at a rally. "The door is open to the White House and on the Republican side of the aisle."
Bush, who has shifted strategies in recent weeks to emphasize that his plan would not affect seniors, said, "This United States will keep our promise to people retired or near retirement."
Although Bush has been on the road selling the plan for months, Monday marked the of a new campaign by Cheney to win support for private accounts. After the town hall here in Thomas's district, Cheney flew 100 miles to a meeting with editors of the Orange Country Register and then to Reno, Nev., where he will host an event in the back yard of Senate Minority Leader Harry M. Reid (D), who is leading the opposition. The vice president heads to Battle Creek, Mich., and Pittsburgh on Thursday.
Cheney kicked off his campaign by showing his respects to the chairman of the House committee in charge of Social Security. Thomas, who two months ago said that because of Democratic resistance Bush's proposal was a "dead horse" and would only be a starting point for Congress, said Monday he wants "to not only take a look at Social Security, but frankly the whole question of aging" and its effect on the government.
He has suggested he would like to combine Social Security with bigger efforts to reform the tax code and deal with rising health care costs.
Thomas on Monday said Social Security is not in a "crisis situation," contradicting the president's assessment. But overall, he spoke approvingly of Bush's approach to changing the system.
Both Thomas and Cheney indicated they were opposed to lifting the cap on income subject to the payroll taxes, currently $90,000. Bush has said he has not ruled out lifting the cap, which Sen. Lindsey O. Graham (R-S.C.) and others support as a way to pay for personal accounts.
"For a lot of small businesses, that is a major hit," Cheney said. The self-employed pay both the employee and employer portions of the payroll taxes -- 6.2 percent for each portion -- so some could be slapped with a significant tax increase if the cap is lifted. For example, if the cap were raised to $140,000, the self-employed with that much net income would pay about $6,000 more in taxes.
Thomas said raising payroll taxes is of little utility in solving the long-term solvency problems. "We have pretty much ridden that horse as far as we can," he said. But the Ways and Means chairman added that he would consider "modest adjustments" to create a more a progressive system that benefits the poor.
Speaking to 400 invited guests who asked friendly questions, Cheney and Thomas stopped short of saying personal accounts must be part of a final deal. In private, though, both have told Republicans it will be virtually impossible to get a bill through the House that does not include them, GOP aides said.
Cheney said the country is headed toward a "financial train wreck" that will leave Americans with smaller benefits in the future if it is not dealt with. "That is what is baked into the cake today," he said.
The doom-and-gloom vision for the future of Social Security contrasted with the optimistic picture Cheney painted for private accounts. He repeatedly talked about the 10-year performance of the investment vehicles offered under the thrift savings plan for federal workers, as well as the broader market. What he did not mention was that if the market were to totally collapse, it could leave workers with a smaller benefit and no way to recoup their losses.