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| SECURING THE SYSTEM | |
 December 10, 1998 
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The White House hosted a conference on Social Security this week in an attempt to push forward reform for the ailing system. Susan Dentzer reports on the conference and on alternatives to the current program. |
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JIM LEHRER: So the headline is that there was some progress made yesterday.
JIM LEHRER: Strange juxtaposition, the - while the president is meeting with members of the congressional - the Republican congressional leadership and others on Social Security, the impeachment process is underway. But the movement is more from the president and the White House, is it not, toward individual accounts, towards trying to find some solution in that area, than it is from the other side? SUSAN DENTZER: Well, actually, the White House has been examining all of these options for quite a while now. And the president has frankly been intrigued at the notion of individual accounts. But the central agreement and accomplishment, I think, of the last couple of days is the agreement that you have to raise the rate of return in Social Security. That means, in effect, that there's an agreement to take the current program, which is largely a pay-as-you-go program, where the taxes coming in every year are hustled out the door right away in Social Security benefits and turning into something more like a conventional pension program where you collect money in advance, invest it, and reserve it for the future. JIM LEHRER: Now, conceptually, that's a major breakthrough, is it not? SUSAN DENTZER: Very much so, and one that many people have argued is necessary for quite some time. The trick now is going to be deciding which way to do that. Is it going to be the approach of investing those Social Security reserves centrally by the government, farming it out to private investment managers, perhaps, but essentially having the government direct the management and the investment of a central fund, or will it be devolved back to individuals to allow them to make decisions about how to invest the moneys? SUSAN DENTZER: That's one piece of the argument. Another piece of the argument is how much of a real rate increase in the rate of return could you actually achieve, can we count on the long-term rate of return in stocks, which has been in-after inflation, 7 ½ percent for decades - can we count on achieving that kind of rate of return in the future, can we, in fact, count on the notion that people - once they took out their money - if they had individual accounts - would use it correctly, or can we count on the alternative of people investing it wisely through individual accounts? All of these are major questions that have to be answered. |
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| An extraordinary opportunity. | ||||||||||||||
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JIM LEHRER: Susan, the atmospherics of this, beyond the impeachment cloud over this, is there a sense of urgency? Did you pick that up at this conference yesterday, that these people are - that everybody feels like there's a crisis that must be resolved, or is this something that we can work on over a period of time and resolve it, what did you come away from?
JIM LEHRER: Is that probably - at this stage - I mean, I'm not going to hold you to this, I promise you, Susan, but at this stage is that the most likely avenue? SUSAN DENTZER: It's the least painful avenue on a rather grim menu of options. Using this money to achieve a higher rate of return means you don't have to cut back benefits as much in the future as you would otherwise; you don't have to raise payroll taxes as much in the future as you might have to otherwise; so it's almost an irresistible return, and I think in some way, shape, or form, we're certain to see some element of investment come out of the repairs of the program. JIM LEHRER: And the risk is less on that way too, is it not? SUSAN DENTZER: Well, there's always risk in Social Security; there's
either political risk that Congress will change the program, or there's
investment risk. And really now it's a question of figuring out what
kind of risks we want to take, what the magnitude is, what the impact
would be on different segments of the population. Those are all very
difficult technical issues, and there was a general agreement this week
to begin JIM LEHRER: Okay. Susan, thank you very much. |
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SUSAN
DENTZER: Absolutely. In fact, people in the White House say it exceeded
their wildest expectations of what could be achieved, particularly this
environment where on another channel in Washington we were watching
of course the impeachment inquiry - 
JIM
LEHRER: And is the heart of that argument that hey, wait a minute, should
we jeopardize the security of the Social Security system to kind of
like gambling in the stock market, is that the problem? 
SUSAN
DENTZER: There's not a sense of crisis about the immediate financial
condition of the program because, of course, the real crunch probably
doesn't come for about 15 years when the amount of money collected by
the program benefits is not sufficient to meet the pay out of annual
benefits. That's a long time away. What there is - a sense of urgency
about fixing this in the current environment before a presidential campaign
gets underway and also when you have an extraordinary opportunity to
tap a frankly kind of magical and welcome source of money, which is
the growing budget surplus and, indeed, which is - which are to a large
degree the Social Security surpluses. If, in fact, you took those funds,
which are projected again at about a trillion and a half dollars, if
all scenarios hold for the next eight to ten years, you could go a long
way if you invested them correctly and wisely at reducing some of the
financial problems that the program is likely to see in the future.
to
start to work through them in a very bipartisan way, and that's what
left everybody feeling so optimistic about the last two days and the
next immediate days ahead.