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Conservatives Splitting on Social Security

In his column, Barro argued that politicians will never allow private accounts to replace the Social Security system. So the accounts system -- as outlined by Bush -- would end up being what Barro views as an unwise supplement to existing benefits. Instead, he argued, the program should be stripped down to a minimum payout to keep the elderly out of poverty while putting Social Security on solid financial footing.

"There is no good reason to go beyond the minimum standard; that is why I view personal accounts as a mistake -- they enlarge a Social Security program that already promises too much," Barro wrote.

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Pollock takes a different tack. As personal accounts are envisioned, most people will see them as too risky and complicated. And the government's upfront borrowing costs are simply too high, he said.

The federal government enjoys a substantial surplus of Social Security taxes, and that surplus is used to finance other government programs. For every dollar "borrowed" from Social Security, the Social Security system receives the equivalent in the form of a Treasury bond.

Rather than have those bonds go to the Social Security Administration, Pollock suggests they go into private accounts, in the form of inflation-indexed Treasury bonds, or TIPS. After some number of years, the bonds could be traded for other investments, like private-sector bonds or stocks.

Under the plan, there would be no huge, upfront borrowing costs for the government. Social Security taxes would remain dedicated to Social Security, answering the Democrats' loudest objection. And individuals nervous about private financial markets would be offered accounts with perhaps the safest investment vehicle on offer.

"The fundamental idea of long-term savings accounts, which really do generate assets for ordinary people, that's a great idea," Pollock said. "The question is, can you design a system that works?"

Kevin A. Hassett, director of economic studies at AIG, said the splintering of ideas among conservatives is only natural. For all of its talk, the White House has yet to formally propose a comprehensive overhaul of Social Security, and in its absence, intellectuals have jumped into the fray.

But with so many ideas in play, the White House has to step in soon with a plan around which conservatives can coalesce, Hassett said.

"If the White House doesn't have a plan soon," Hassett said, "it's very unlikely the White House will win."


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