Online NewsHour: Social Security -- December 10, 1998



	SECURING THE SYSTEM

December 10, 1998

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.

Aug. 5, 1998:
How should Social Security be reformed?

April 7, 1998:
The state of Social Security.

Jan. 13, 1997: Reforming Social Security

Dec. 5, 1996:
A Dialogue with Pete Peterson

Browse the NewsHour's Health Spotlight

A transcript of the President's speech

Social Security Administration

Public opinion polls about Social Security

The Urban Institute

The Center on Budget and Policy Priorities

The CATO Institute supports privatization

JIM LEHRER: The Social Security update comes from Susan Dentzer of our health unit, a partnership with the Henry J. Kaiser Family Foundation.

SUSAN DENTZER: President Clinton says he wants to leave behind a solvent Social Security program as a lasting legacy of his White House years, so this week, he invited lawmakers, Social Security experts, and representatives of interest groups to a Washington conference. They discussed ways of averting the program's looming financial woes.

PRESIDENT CLINTON: We should begin this process on common ground, agreeing above all on the importance of acting and acting now while we can during prosperous and productive times that Americans have worked so hard to achieve. Already, some are predicting that we are simply incapable of doing this in Washington. I am determined to prove them wrong.

SUSAN DENTZER: From payroll tax hikes to benefit cuts, there are no painless or problem-free options for repairing Social Security. So on Wednesday, the president called lawmakers to a closed-door session to see whether any common ground really could be reached. When the session broke up later, it looked as if there was the beginning of an agreement on at least some core issues. One was the need to increase the rate of return earned on taxes paid into Social Security. Gene Sperling heads the president's National Economic Council.

GENE SPERLING: Many of the people there felt that overall - frankly when compared with the alternatives - that seeking some strategy to bring in higher returns through investment would be the - would be a good way to go.

How to capture?

SUSAN DENTZER: But just how to capture those higher returns? One leading option is to have the government invest a portion of Social Security's growing reserves in the stock market. A second option is to allow individuals to invest a portion of their Social Security taxes into personal accounts. Those accounts could be similar to IRA's or 401-K plans. Many moderates and conservatives like Republican Rick Santorum of Pennsylvania favor individual accounts.

REP. RICK SANTORUM: We need to take a portion of the money that's going into the trust fund right now - 2 or 3 percent of payroll - and put that into a personal savings account to give people the opportunity to have wealth and create wealth and to preserve their own Social Security by growing that pot of money that we now send to Washington.

SUSAN DENTZER: By contrast, many liberals oppose individual accounts; they fear that diverting some payroll taxes into them would eventually require sharp cutbacks in future Social Security benefits. But House Minority Leader Richard Gephardt has opened the door to still another option, adding individual accounts on top of the current program.

REP. RICHARD GEPHARDT: In my view they should be voluntary; they should be a supplement, not a replacement for the foundation of Social Security. We need to build on our current retirement system.

SUSAN DENTZER: Still another option for funding individual accounts is being closely examined by President Clinton and many in Congress. The plan would transfer into newly created individual accounts all or some of the roughly 1 � trillion dollars in federal budget surpluses projected over the coming decade. That would mean that an amount equal to about 2 percentage points of the payroll tax could go into the accounts each year.

SPOKESMAN: I thought there was a growing consensus that in some way or another the surplus that we've reserved should be part of the solution and that with the surplus and the possibilities for higher returns, we increase the chances of having the Social Security reform package that keeps a strong standard of living for Americans - American senior citizens and could be politically palatable enough to pass.

SUSAN DENTZER: The trick would be figuring out how to fund individual accounts after 2008, when those annual budget surpluses are likely to dry up. But for now, that difficult discussion lies down the road, and this week, at least, the president and lawmakers took the first tentative steps to getting there.