House GOP Offers Plan For Social Security
Thursday, June 23, 2005
After watching the Social Security debate from the sidelines, House Republican leaders yesterday embraced a new approach to Social Security restructuring that would add individual investment accounts to the program, but on a much smaller scale than the Bush administration favors.
The new accounts would be financed by the Social Security surplus -- the amount of payroll tax revenue not needed to pay current benefits. That money is now used to fund other government activities and is expected to run out after 2016 as the baby-boom generation retires.
By contrast, President Bush's proposed accounts would divert payroll taxes used to fund existing Social Security benefits, which would force the government to borrow to prevent cuts in retirees' monthly checks. Once fully phased in, the Bush plan would allow workers to sock away $3,600 a year in today's dollars. Even in its peak year, the new plan could limit average account contributions to as little as $588.
Still, Republicans hope the new proposal will shift the debate away from future benefit cuts, as Bush envisions, to ending what they call the "raid" on the current Social Security surplus. But the plan, unlike Bush's, would do nothing to remedy the New Deal-era program's long-term fiscal problems.
An aide to House Speaker J. Dennis Hastert (R-Ill.) called the bill "a great start," and House Majority Whip Roy Blunt (R-Mo.) called it "an excellent first step." Aides said leadership will gauge reaction over the July 4 break.
Rep. Eric I. Cantor (R-Va.), the deputy House majority whip, called it "a breakthrough day," and Sen. John E. Sununu (R-N.H.) said the announcement was a victory simply because "there is movement" on a plan that many on Capitol Hill had written off as dead. But Democrats were vociferous in their condemnation, and some Republicans in the Senate remained doubtful.
Rep. Paul Ryan (R-Wis.), an ardent backer of personal accounts, said the current system in which surplus money in the Social Security system is used for general government spending "papers over the true size of the debt, and what this proposal does is unmask the debt."
"When the program is up and running, Congress will be faced with decisions whether to borrow, raise taxes or cut spending, which is what we should be faced with," Ryan said.
The new House initiative comes as public opposition to Bush's plan continues to grow and the Senate stands at an impasse, while House leaders have increasingly shown a reluctance to bring to a vote any plan that cannot be enacted.
Bush has made Social Security changes the centerpiece of his second-term domestic agenda, but it has proved far more difficult than White House officials had anticipated. Although the new plan is considerably less broad than Bush's approach, it would still fundamentally change the way the Social Security system operates.
This year, Social Security will bring in $69 billion more in taxes than the system pays in benefits. Congress will borrow that money to fund other programs and then send $69 billion worth of Treasury bonds to the Social Security Administration. Those bonds would be cashed to finance benefits once the system slipped into deficit.
Under the new proposal, those bonds would go to private investment accounts that would be opened for workers unless they chose not to participate.