President to Push for Reform of US Pension System Before US Congress



Well before President Bush delivers his State of the Union Address, the issue likely to be the biggest political battle of his second term is already the subject of heated debate: his proposal to reform the 70-year-old U.S. pension system called social security. Opponents of the president's plan for the social security system say it could plunge millions of Americans who are dependent on the program into economic difficulty or poverty. Supporters insist the retirement program needs emergency help now to survive in the future.

Social Security, the two words alone provide a description of a program originally intended to help Americans struggling to recover in the years after the 1929 depression, the nation's worst economic crisis.

Often cited as one of the greatest achievements of American government, social security was part of President Franklin Roosevelt's "new deal" package of economic stimulus policies.

It established a system of old-age pensions, survivor's benefits and help for the disabled, providing an economic safety net for the elderly, a barrier against poverty.

Today, 48 million Americans receive social security benefits. With private savings and other investment, it provides a majority of the income for two thirds of elderly Americans, and is especially critical for elderly African Americans and Hispanics.

Financed chiefly by automatic wage deductions, the social security fund grew over the years, and it was thought, could never be in danger of running out of money. But as birth rates slowed and the number of elderly Americans grows, it has become apparent that the system will eventually go bankrupt.

In 1983, Congress tried to buy more time, and adjusted social security. It raised the retirement age, and increased the percentage of social security taxes taken from paychecks. Today, projections of when the system will begin having trouble paying out benefits it promised focus on the year 2042 or later.

As he begins his second term, President Bush wants Congress to pass legislation that would partially privatize the system by allowing Americans to set up personal investment accounts with money that would have gone into the social security fund: "If you're 20 years old and you are in your mid-20s and beginning to work, I want you to think about a social security system that will be flat bust, bankrupt unless the U.S. Congress has got the willingness to act now," he said.

A scary scenario, but one heard before from, among others, former President Bill Clinton in 1998: "If you don't do anything, one of two things will happen. Either it will go broke and you won't ever get it (payments), or if we wait too long to fix it the burden on society of taking our generation's social security obligations will lower your income and lower your ability to take care of your children," Mr. Clinton said.

With social security reform now at the top of the agenda of a Republican-controlled Congress, supporters and opponents agree the system does face a long-term deficit.

But critics accuse President Bush and Republicans of using scare tactics, and point out that social security still has 40 to 50 years during which it will be able to pay almost all benefits. Ken Afpel is a former social security commissioner: "Privatization only leads most likely to drastic cuts in promised benefits to younger workers, as well as an erosion in the financing system of social security which could put the benefits of current workers at risk over time. Let's solve a manageable problem, not create a much bigger one," he said.

Henry Aaron of the Brookings Institution makes this point about privatization: "We have social security for one simple reason, to assure basic income. And assure means something. It means the income will be available for sure and not for maybe, not if the stock market is up, not if inflation is low, in all circumstances. By their very nature, private accounts face financial market risks, that are antithetical (opposed) to the fundamental purpose of social security, of assuring basic income," he said.

But supporters counter by pointing to social security systems in other countries, such as Sweden, Britain, Australia, and Chile, and changes there that have included privately-invested accounts.

President Bush has strong support from some key Republicans in Congress, including Senator Rick Santorum: "I understand why taking on a tough issue such as social security is something that you would rather just pass on to the next Congress or the next generation. But that is not the responsible thing to do," said Mr Santorum..

But some moderate Republicans in Congress are skeptical, and this poses a problem as the president tries to build momentum.

One Republican lawmaker, Congressman Bill Thomas who chairs the powerful House Ways and Means Committee, would broaden the scope of reform, with such proposals as a new tax to make up for shortfalls, and adjusting social security according to gender to account for changes such as more women working and greater pay equality: "If we're talking about limited resources, and expanding needs, maybe there ought to be a discussion about prioritizing who gets what, when and how, beyond the narrow pieces inside the social security box," he said.

Women's advocacy groups are especially cautious regarding any moves they fear would put women at a disadvantage. Joan Entmacher is with the National Women's Law Center: "Privatizing social security would be particularly hazardous for women because of the special role that social security plays in women's lives," he said.

Maya Rockeymore, with the Congressional Black Caucus Foundation, says privatization would be a blow to African-Americans and others who depend on social security. "African-Americans, Hispanics and young people have been the target of a campaign of misinformation from those who claim they can earn great levels of wealth by diverting money from the social security trust fund to create these individual accounts that can be invested on Wall Street," she said.

Among other groups, the nation's largest trade confederation, the AFL-CIO has launched a large public relations campaign against President Bush's social security reform plan.

But Mr. Bush says he plans to travel around the country to promote his plan, and he is certain to devote a good part of his State of the Union Address to it.

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