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Social Security Debate Arrives at Senate Finance Committee

April 26, 2005 at 12:00 AM EDT


SPOKESPERSON: The president of the United States.

MARGARET WARNER: Today, as President Bush neared the end of his 60-day campaign for private Social Security accounts, he was touting his proposal’s merits in Galveston, Texas.

PRESIDENT GEORGE W. BUSH: Younger Americans ought to be allowed to take some of their payroll taxes, some of their own money, and invest it in a savings account, a personal savings account, an account they call their own. I like the idea of people owning something. We want people owning something in America. If you own something you have a vital stake in the future of your country. If you own your assets, you can pass it on to whomever you choose. We want more people owning assets.

MARGARET WARNER: Back in Washington, the Democrats countered with a boisterous outdoor rally to rail, once more, against the president’s idea of private accounts.

SEN. DICK DURBIN: Let me tell you what. If he’s going out to push for privatization, let’s help him pack. America’s families know better. They know that privatization means deep cuts in benefits. They know privatization means a deeper debt for America and they know that privatization doesn’t make Social Security stronger. We know that today, and we gather this afternoon in a declaration of unity.

REP. NANCY PELOSI: We will not allow this proud achievement of the New Deal to turn into a raw deal for the American people. We say to the president, “We will not allow a guaranteed benefit to become a guaranteed gamble for the American people.”

MARGARET WARNER: The Democrats ended with the signing of a giant declaration of unity against individual accounts.

MARGARET WARNER: And a little dancing.

MARGARET WARNER: Neither the president nor the Democrats has introduced a formal plan. But this morning, Chairman Chuck Grassley convened the first Senate Finance Committee hearing to explore some specific plans offered by outside experts to guarantee Social Security’s solvency.

SEN. CHUCK GRASSLEY: If we’re going to accept the responsibility we should to address Social Security reform this year, we should do more than just kick the can down the road a while.

MARGARET WARNER: But the president’s personal accounts idea got kicked around plenty by committee Democrats.

SEN. JOHN KERRY: Where’s the president’s plan? There is no plan from the president. There’s an idea. There’s an idea about private accounts, which does nothing for solvency, and solvency is the fundamental problem of Social Security.

MARGARET WARNER: The experts who testified offered various ideas on how to guarantee Social Security’s solvency, with and without individual accounts. Peter Ferrara, a senior fellow at the Institute for Policy Innovation, backed the president’s idea.

PETER FERRARA: My goal is to make Social Security reform a major net gain for workers, not a loss. Personal accounts give us the opportunity to do that. In fact, if we do personal account reform right, we can achieve all the major social goals of Social Security better than the current system does today.

MARGARET WARNER: Peter Orszag of the Brookings Institution favored a mix of tax increases and benefit cuts to restore long-term solvency, and flatly opposed individual accounts.

PETER ORSZAG: The accounts do nothing to reduce the long-term insolvency of Social Security. Arguing that they do is like arguing that snake oil will help to cure strep throat, because if you take snake oil along with an antibiotic, your strep throat goes away. The snake oil is not anything to get rid of the strep throat; the accounts are not doing anything to get rid of your $11 trillion deficit.

MARGARET WARNER: Business executive Robert Pozen called for progressive indexing, a formula for making Social Security benefits for the wealthy grow more slowly than those for the poor.

ROBERT POZEN: Progressive indexing is pretty simple: We divide the world into low wage, defined as $25,000 and lower in average career earnings; high wage, defined as $113,000 and higher; and middle wage. And we preserve the current benefits and the future benefits for all low-wage workers, all workers who are in retirement, and all workers who have not yet retired but will retire before 2012. We then take the high-wage workers, we grow their benefits by price indexing rather than wage indexing their initial benefits, and then we have a proportional formula for people in between.

MARGARET WARNER: Back in Galveston, the president urged Congress to act this year.

PRESIDENT GEORGE W. BUSH: I am confident we’ll get something done in Washington, D.C. I’m confident because eventually the voice of the people will reach and penetrate the halls of the House and the Senate, and they’re going say, “We have a serious problem. Why aren’t you doing something about it?”

MARGARET WARNER: But so far, the public doesn’t seem to be buying the president’s core proposal. A Washington Post/ABC News poll out today showed that support for individual accounts has actually declined during the president’s campaign for the idea, from 56 percent in mid-March to 45 percent in late April.