Democrats, who have denounced President Bush's plan to allow workers to invest some of their payroll taxes in stocks, signaled Tuesday that they too would turn to the stock market to bolster the financial future of the giant retirement system.
The move marked the first time that Democrats have countered Bush's plan to rescue Social Security with a stock strategy of their own. But, unlike Bush, they would leave it to the government to do the investing and take the inherent risks.
The contending positions became clearer as the president's Social Security Commission--dogged by protesters--adopted a staff report concluding that the 66-year-old retirement system is on the road to financial ruin.
Although the commission is months away from putting flesh on the bones of Bush's broad plan to privatize some of Social Security, it has already become a target of fierce attacks by Democrats and labor, who oppose any alteration in the current program.
Protesters who oppose any changes held more than 30 rallies across the country Tuesday, including a demonstration outside the hotel where the commission was meeting. Picketers from the AFL-CIO chanted, "Hey, hey, ho, ho, Bush and Wall Street have got to go." In a bit of street theater, a man in a Bush mask sitting inside a limousine told three people costumed as a construction worker, a nurse, and a maid, "What's wrong with working till 70?"
Meanwhile, Rep. Ellen O. Tauscher (D-Alamo), speaking at a news conference, said 10% to 13% of the Social Security trust fund surplus--about $1 trillion and growing--could be invested in the stock market, just as California and other states have "professionally managed accounts." Under current law, the retirement system's surplus must be invested in Treasury securities.
Sen. Jon Corzine (D-N.J.), who joined Tauscher in speaking to reporters, said the money could be invested in mutual funds that rise and fall in lock-step with the broad market indexes such as the Wilshire 5000, which reflects a wide range of companies of all sizes. That would keep the government out of the uncomfortable position of choosing market winners and losers and becoming a part owner of individual companies.
Corzine suggested that the Federal Reserve Board might be the appropriate agency to handle the government's investments.
In its report, the commission indicated that, although benefits are assured for today's retirees, major changes must be made to avert a crisis in the future.
"The system is unsustainable," said Richard D. Parsons, co-chairman of the commission and co-chief operating officer of AOL Time Warner. "It cannot go on as it is today. We cannot stick our head in the sand and refuse to say we have a problem."
Commission members are sensitive to the rising chorus of criticism.
"I would encourage my fellow Democrats to lower the rhetoric and stop the 'kill the messenger' strategy and focus on trying to address a very serious problem that will not go away simply by calling names," said Robert L. Johnson, a commission member and chairman and CEO of Black Entertainment Television.
President Bush has said any change in Social Security would be voluntary, allowing workers to switch some of their taxes into personal accounts. The commission has the twofold task of raising the issue's visibility among the American people and coming up with a detailed plan to make it work.
Social Security, facing the retirement of the massive baby boom generation, is forecast to exhaust its surplus in 2038. With only that year's payroll taxes to rely on, the Social Security system will be able to pay only 72% of benefits promised under current law.
Bush and many Republicans say the answer is to let individuals keep control of perhaps 20% of their payroll taxes and invest it in more lucrative instruments than Treasury securities. Democrats argued that this approach would expose the poorest workers--those with no investment experience--to the greatest risks.
But they suggested Tuesday they would be willing to use the stock market on a collective rather than an individual basis.
Senate Majority Leader Tom Daschle (D-S.D.) said many Democrats could support proposals to shore up the trust fund by using savings from debt reduction, as well as proposals that allow investment by the government, at least on a pilot project basis.
Sen. Maria Cantwell (D-Wash.) said Americans' retirement security could be strengthened through new accounts financed by tax credits for individuals and matching contributions by government for those who opened the accounts.
"We could take some of the budget surplus" and use it for tax credits and for the matching program, Cantwell said.
Times staff writer Janet Hook contributed to this story.