President Bush’s Commission for Social Security Reform
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SUSAN DENTZER: With today’s announcement, President Bush made good on a campaign pledge to launch a sweeping reform of Social Security; a program that he said faced long-term financial challenges.
PRESIDENT GEORGE W. BUSH: It has been apparent for many years that Social Security itself is becoming insecure. Social Security was designed for an era when few Americans lived much past the age of 65. When Social Security was created, there was about 40 workers paying Social Security taxes for every one retiree receiving benefits. Today there are three workers for every retiree; soon, there will be two.
SUSAN DENTZER: The President said steps were needed to address these trends and to make the program solvent over the long haul. But he also said a key component of reform should be offering younger workers the chance to invest some of their Social Security taxes in private accounts. Those, in turn, could be invested in stock and bond mutual funds and potentially other investments.
PRESIDENT GEORGE W. BUSH: Today, young workers who pay into Social Security might as well be saving their money in their mattresses. Personal savings accounts will transform Social Security from a government IOU into personal property and real assets, property that workers will own in their own names and that they can pass along to their children. Ownership, independence, access to wealth should not be the privilege of a few. They’re the hope of every American, and we must make them the foundation of Social Security.
SUSAN DENTZER: To help deliver on that goal, the President appointed a commission heavily weighted with proponents of private accounts. They included the Democratic and Republican co-chairs: Former New York Senator Daniel Patrick Moynihan, and AOL Time Warner executive Richard Parsons, who previously served in the Ford administration. Parsons was blunt.
RICHARD PARSONS: I am a baby boomer. I was born in 1948, and I’ve been contributing to the Social Security system since 1964. And until this point in time I’ve never believed that I was going to get anything out of Social Security when I retired. (Laughter) Never. ( Applause )
SUSAN DENTZER: President Bush also named to the panel 14 others nominally split between the two parties, including business executives, economists and other former government officials. But moments after the panel members were introduced at the White House, the criticism began. House and Senate minority leaders Richard Gephardt and Tom Daschle met with reporters on Capitol Hill.
REP. RICHARD GEPHARDT: This is not a bipartisan Social Security commission, this is a Presidential advocacy commission; it is a preordained outcome. As Tom said, all of the members of the commission have already stated in one way or another that they are for the President’s plan.
SUSAN DENTZER: And that plan merited skepticism, they said, especially in light of the recent stock market slump.
SEN. TOM DASCHLE: I would ask anybody a year ago, if you had the choice of investing in your NASDAQ account or investing in Social Security, which of those two accounts would be better today? Which would be stronger? And there is no doubt in our mind that a Social Security account over the last year would have been far stronger.
SUSAN DENTZER: And the critics charged that as Congress negotiates with the President on his proposed tax cut and spending plans, the money once earmarked for private accounts is disappearing.
REP. RICHARD GEPHARDT: If you really take their privatization proposal and put it up against the budget, it would cost the budget an additional trillion dollars of funds in order to fund these private accounts over the next ten years. Where is that going to fit in to the budget that they’re talking about? In truth, what he announced yesterday on taxes makes impossible what he announced today on Social Security.
SUSAN DENTZER: The President wants the new commission to report back to him next fall in the hope that reform legislation could be introduced next year.
JIM LEHRER: Susan Dentzer is now with Margaret Warner.
MARGARET WARNER: So, Susan, tell us more about this commission. Are the Democrats right when they say that all these commissioners are basically down-the-line supporters of some kind of privatization?
SUSAN DENTZER: Well, it’s certainly true that all the commissioners who previously said anything about Social Security or are known to hold views on Social Security are more or less in favor of individual accounts, with some nuances. Some of them don’t want to do individual accounts at any cost. They’re very concerned, some of them, about how you would pay for them over the long haul. But, generally speaking, the ones who have been vocal on Social Security do favor individual accounts. This is though like any typical Government commission. There are people who know a great deal about the subject. There are people who know next to nothing about the subject on this commission. And there are people who are pretty much window dressing.
MARGARET WARNER: The criticism is certainly predictable when the White House stacks a commission like this. Why did the White House do it this way?
SUSAN DENTZER: There was much furious attempt to read tea leaves in Washington today on just that question. One model of a Social Security reform commission would have had sitting lawmakers empowered to make decisions, go back, push them through their committees, push legislation, round up votes; that’s not this model. Another model would have potentially reached out in what is in effect a very contentious area. What do we do with the biggest government program that most of us have a great deal of a financial stake in? One model said reach out to people on the other side, people of different views. Democrats who really hold very different views from the President, the kind of true bipartisanship that the Democrats in Congress are constantly hammering on the President to deliver when he says, in fact, that’s his goal to deliver on– that would have been another model; that was not the model that this commission is. What this commission does appear to be is a group of people– again, some of them very, very respected economists– who are predisposed to individual accounts who are probably there to do some thinking through of some very technical issues about how you set up individual accounts and meet some of the other parameters that the President laid out for them.
MARGARET WARNER: Because the executive order laying this out says they’re supposed to come up– I think they say– to modernize and restore fiscal soundness to Social Security. But then there are these very tight parameters. I mean, they’re on a pretty short leash with what they can come up with.
SUSAN DENTZER: Right. In effect, they were told they can’t look at the idea that has be floated of taking Social Security surpluses that are building up or the Social Security trust funds and investing those directly in the stock market to raise the rate of return of the funds of the program.
MARGARET WARNER: You mean where the government would do that.
SUSAN DENTZER: Where the government in effect would do that. That was off limits. Not surprisingly, that’s something that ideologically Bush and others have long been opposed to. They were also told though, in effect set some goals that were potentially mutually exclusive. One, is that these accounts should be made voluntary. Lots of people who have looked at this idea of making individual accounts voluntary say it’s not workable; that, in fact, it could further jeopardize the financial stability of the program. So that’s one hurdle they’re going to have to overcome. An additional hurdle is in effect since he told them to make the program fiscally sound over the long haul, there’s no one who has looked at this who thinks that only instituting individual accounts accomplishes that. In fact, there has to be substantial new money injected into the Social Security system or very large benefit cuts or some combination of both.
MARGARET WARNER: But does it look to you as if essentially the White House said… Not come up with whatever you think is the best plan, but rather, “here’s what we think is the best plan: Find a way to make it work — come up with the mechanics”?
SUSAN DENTZER: There are, again, many theories about what this commission is supposed to do. One school of thought says it’s really just buying time for six months or so while we get some of these big debates over this year’s budget and this tax cut behind us. That’s useful because that will tell us how much money there is left to fund the individual accounts in the future, if any, and also what could potentially be left ten years from now when the rubber really hits the road and the mechanisms of funding individual accounts get quite difficult. So that could be one objective. Another possible objective is to think through these technical issues and potentially even come out with the bald truth that it’s going to be very, very difficult to do this without putting new money into the system.
MARGARET WARNER: So that raises the cost issue. Now the Democrats say that to do what President Bush said as a candidate he wanted to do, that kind of privatization would cost a trillion dollars over ten years, and the money is already gone. Are they right about that? Where does the White House think the money is?
SUSAN DENTZER: Well, in fact, what the White House says is there’s enough money building up in the Social Security surpluses over a ten- year period so that you could take something on the order of $80 billion, $100 billion a year and use that money to seed the individual accounts. And that probably is workable for about ten years. At that point, given the great uncertainty of budget surplus projections, that aside, it becomes very, very difficult to do that, and in fact, over time it probably accelerates the rate at which Social Security becomes insolvent. The only way out of that is to put more money into the program. And it’s interesting that Caroline Weaver, one of the economists on the panel who was on a prior Social Security Commission, supported an individual accounts proposal back then that actually would have not only raised the payroll tax, floated a trillion dollars of government bonds in order to finance the individual accounts approach. That was a plan that basically recognized the true cost and dimension of doing this, and it could be that this panel maybe is going to put some reality on the actual mechanisms of having individual accounts.
MARGARET WARNER: Now, finally, the panel has been asked to report by this fall pretty quickly, but given all these obstacles we’ve just laid out, I mean, what realistically can we expect or when can we expect it to actually lead to something in the way of legislation or even a proposal?
SUSAN DENTZER: There is some belief that this has to be done before the midterm elections because of the risk that the Houses of Congress could change hands. So one school, the pro- privatization school, is pushing that this be done very quickly. And in fact Treasury Secretary O’Neill has repeatedly said that after the tax cut is out of the way, this is the next big item on the agenda. This issue, however, is so contentious, this would be the largest structural reform in the program since its inception in the 1930s. It’s very difficult to believe that that skates through Congress on a narrow party line vote and particularly in a run- up to mid-term election.
MARGARET WARNER: All right, Susan. Thanks very much.
SUSAN DENTZER: Thanks, Margaret.