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Monday, June 17, 2024

Back from the dead?

So you thought President Bush's plan to overhaul Social Security with private accounts was dead?

So you thought President Bush’s plan to overhaul Social Security with private accounts was dead?

After all, his top second-term priority went nowhere last year when almost all sides disliked the plan the more Bush explained it. And nothing has happened since his 2006 State of the Union call for a bipartisan task force to tackle the long-term solvency of Social Security and Medicare in the face of 76 million baby boomers’ retirements.

Yet restructuring Social Security lives on as an issue:

_ New Bush chief-of-staff Josh Bolten, in a series of press interviews, stressed his interest in paving the way for a renewed push on Social Security and Medicare. He says there’s a “keen appreciation around here” of the need to count on more than Republican votes to pull off major changes to both programs.

_ Rep. Jim McCrery, R-La., stirred up a ruckus with a recent speech to the U.S. Chamber of Commerce. McCrery, chairman of the House Social Security subcommittee, told the pro-privatization Chamber that the Republican White House and Congress lack the political capital to take on health care and tax reform but that Social Security “is easy to solve” and looks to start over “at square one” next year. Critics led by AFL-CIO President John Sweeney say McCrery “spilled the beans” about what Republicans plan after the 2006 elections.

Perhaps all could take a page from the bipartisan Social Security playbook that three self-described policy wonks from different political camps unveiled this week at the American Enterprise Institute, a Washington think tank.

The three _ former Bush aide Andrew Samwick, former Bill Clinton adviser Jeffrey Liebman and former John McCain budget expert Maya MacGuineas _ test-drove a compromise each could live with for an audience of likeminded policy heavyweights.

The plan _ nicknamed LMS for authors Liebman, MacGuineas and Samwick _ agreed on the goals as well as the problem: By mid-century, Social Security will be able to pay only 75 cents of every $1 in promised benefits under the current system. Any solution involves raising taxes, cutting promised benefits or a combination of both.

To make the math add up, the three experts spread the pain so each got something but nobody got everything:

  • Guaranteed Social Security benefits that Democrats want would stay the centerpiece of the program but would be trimmed by changing the payout formula.
  • Private accounts that Republicans like would require workers to set aside 1.5 percent of pay atop 1.5 percent from Social Security payroll taxes. But the accounts would be atop basic Social Security benefits, and you’d have to buy an annuity on retiring with what the money account had earned.
  • The retirement age for full benefits, already 66 for people retiring today and rising to 67 for those born after 1959, would gradually increase to 68. The age for reduced benefits, now 62, would increase to 65.
  • Payroll tax rates would stay the same, but taxes would rise for high-wage workers. The current 12.4 percent Social Security payroll tax rate — half from worker paychecks, half from bosses — would remain.

But the cap on taxable wages established by the 1983 Social Security bailout law would return to 90 percent of earnings. No payroll tax is owed on the amount by which paychecks exceed $90,000, or 83 percent of top Americans’ pay. At 90 percent, payroll tax would be owed on the first $171,000 of paychecks.

“Absent political grandstanding,” Liebman says, wistfully, “it should be possible to get a deal done.”

But no sooner had LMS presented their mutual plan than the reasons the Bush Social Security proposal died aborning sprang back to life as the second think-tank panel picked apart LMS

Republican panelists claimed Democrats won’t even face up to the fact Social Security has a problem. Democrats countered that Republicans only raise the issue to rally their conservative base. The AARP’s David Certner went so far as to refuse to entertain any plan that redirects Social Security tax to investment accounts.

So even the wonkiest of wonks can fall to name-calling in a two-hour think-tank session, but their animus toward a Social Security restructure is a pale imitation beside the poison partisanship that has paralyzed Washington policy-making the last five years.

Bush staff chief Bolten hit the mark in telling The Wall Street Journal that Social Security reform “will be near impossible to achieve on a strictly Republican-vote basis, so we’ll need bipartisan cooperation.”

But wishing isn’t getting in today’s poisonous atmosphere, leaving a Social Security overhaul where it was in 2005: dead or at best on life support.

(Contact Mary Deibel at DeibelM(at)