Social Security Panel Offers Options but No Fix

The solution to Social Security’s financial predicament seemed to grow more distant Tuesday, with a presidential commission failing to rally around a single plan for letting workers invest some of their payroll taxes in stocks and bonds. Instead, the panel sent President Bush three options.

“Let’s take the next year or two to have a discussion” of Social Security’s future, Richard Parsons, co-chairman of the President’s Commission to Strengthen Social Security, said after the panel’s final meeting.

Also on Tuesday, the House of Representatives began work on a resolution ruling out benefit cuts and tax increases to keep Social Security afloat, with approval expected.

Trying to sidestep political controversy, the commission issued three plans with scant detail about how any would ensure the future solvency of the retirement system.

All three options would meet Bush’s goal of giving workers the authority to invest at least some of their payroll taxes as they saw fit. Bush and other advocates of this approach hope that the investments would earn such high rates of return that today’s tax rates could sustain the retirement benefits promised to the huge baby boom generation, which is about 10 years away from beginning to reach retirement age.

Parsons, who was named chief executive of AOL Time Warner Inc. last week, said the plans should be viewed as only the first step in a national journey to reform Social Security. “These illustrate ways in which to attack the problem, they move the ball down the field,” he said at a news conference.

With Democrats and senior groups eager to blast the report, commission members made it clear that none of the changes they discussed would touch the benefits of the 44 million people now receiving monthly retirement checks, or workers who are 55 or older.

The first plan would allow workers on a voluntary basis to place an amount equal to 2% of their income into individual investment accounts. Their payroll tax rate, now 6.2% of salary up to $80,400 a year, would be reduced to 4.2%.

Their traditional retirement benefits would also be reduced by a commensurate amount--with the hope that income from the individual investments would more than make up the difference.

The second plan would allow individuals to invest as much as 4% of their income in a personal account, up to a maximum of $1,000 a year.

The third plan would leave the payroll tax at 6.2% and allow workers to place 1% more into a personal account. To this, the government would add an amount equal to 2.5% of their salary. Traditional benefits would be trimmed for all workers.

The second and third plans would help low-income workers by creating a basic benefit equal to 120% of the federal poverty standard. It would also increase survivors’ benefits, a step that would help widows, who have the highest poverty rate among Social Security beneficiaries.

The commission had barely completed its two-hour session and a news conference when critics condemned its work. Rep. Robert T. Matsui (D-Sacramento) said the commission’s work was “an attempt to fool the American people” and begin the process of dismantling the traditional Social Security system.

He said the president should summon Republican and Democratic leaders of Congress to the White House to negotiate a deal on Social Security “with the least discomfort to the American people.”

That Congress has no appetite to take tough measures to shore up Social Security became obvious hours after the commission issued its report. Without action, it is estimated that the retirement system will exhaust its current surplus in 2038, and its annual tax receipts will be enough to pay only 72% of the benefits promised under current law.

In the resolution being worked on Tuesday, the House declared its intention that the promises in current law should be kept, that future cost-of-living benefit adjustments should keep pace with inflation and that there should be no increase in taxes. The resolution, which does not need the president’s signature and lacks the force of law, does not spell out how all those potentially contradictory goals should be accomplished. A vote of overwhelming approval is expected today.