Liberals Line Up on Social Security

A cadre of House liberals, admitting that they have been outmaneuvered in discussions concerning the future of Social Security, on Tuesday announced a campaign to defeat proposals that would allow workers to place some of their Social Security taxes into individual investment accounts.

The debate about revamping the retirement system “has been one-sided and has shut out the voice of the American people,” said Rep. Jerrold Nadler (D-N.Y.) as he unveiled a resolution declaring that individual accounts would harm Social Security.

His resolution, which has 58 co-sponsors--57 Democrats and independent Bernard Sanders of Vermont--will not pass the Republican-controlled House, Nadler admitted, but it will serve as “an organizing and educational tool” for defenders of the traditional Social Security system to rally around.

Private investment, once considered an offbeat idea, has gained publicity and support in Washington as a vehicle to deal with the future solvency of Social Security.

Backers of such investment plans say that placing the money in stocks and bonds would generate a better return for individuals than the current Social Security system, which invests its surpluses in Treasury securities.

The idea is widely popular among the GOP majorities in the House and the Senate. And its supporters were given a boost when two influential Senate Democrats, Daniel Patrick Moynihan of New York and Bob Kerrey of Nebraska, offered a plan to reduce payroll taxes, allowing workers to choose either more take-home pay or individual accounts.

The strong performance of the stock market in recent years has fueled enthusiasm for individual investment accounts.

The Clinton administration says that private accounts are one of the ideas on the table. The administration is devoting this year to public forums and discussions of Social Security’s future, culminating in a White House conference in December.

President Clinton has promised to meet with congressional leaders early next year to try to develop a bipartisan plan.

Until now, liberals who do not want to alter the basic nature of Social Security have been largely silent.

“The truth of the matter is that those of us in Congress who believe in Social Security . . . have been negligent. . . . We have been complacent,” Sanders said.

Now, Sanders says, “we are telling folks who want to destroy it for their private gains that we are fighting back.”

The proposed resolution denounces individual accounts as a “hastily conceived and radical” idea that would “require significant reductions in guaranteed benefits.” Instead, it says, any changes should be enacted “within the existing Social Security structure.”

The Social Security debate focuses on how the retirement system will handle the baby boomers, the 76 million Americans born between 1946 and 1964.

Current estimates are that Social Security will face its financial threat in 2032, the first year in which the system will be unable to pay full benefits promised under law. Payroll taxes in that year will finance 75% of the benefits.

Nadler offered a menu of options for dealing with the issue. They include:

* Allowing the central Social Security system to invest some funds in the stock market the same way that state and local pension systems invest in equities. Under this plan, the federal government would assume the risk of a declining market.

* Increasing the wage base for Social Security taxes. The payroll tax is 12.4% (with 6.2% each paid by workers and employers) on salaries up to $68,400 a year. About 6% of all workers make more than this ceiling.

* Bringing newly hired state and local government workers under the Social Security system, generating new payroll tax revenue.