Still Insecure Social Security

President Bush’s new commission on Social Security may be bipartisan, but it is something less than independent.

All 16 of its members, eight Republicans and eight Democrats, have assured the White House that they share Bush’s ideas for changing the system, foremost of which is allowing its partial privatization. All also apparently accept Bush’s opposition to raising payroll taxes to rescue Social Security from future deficits. Instead, says Lawrence B. Lindsey, the president’s chief economic advisor, the commission will be expected to make recommendations on such matters as how much money people should be free to invest privately, whether the government should compensate those whose private investments don’t do well, and whether future benefits should be reduced.

There have been nine Social Security reform panels in the last two decades, only one of which saw any of its recommendations adopted. A White House spokesman acknowledges that the new commissioners’ unanimity of views on key questions was deliberately sought, since the president doesn’t want “deadlock” but “action.” It seems unlikely he will get it.

By excluding sitting members of Congress from the panel, Bush offended many who will have the final say on whether and how Social Security is changed. And by asking Congress to act in 2002 on the commission’s recommendations, which are due this fall, he invited the whole of the House and the one-third of the Senate that faces reelection to embrace controversy. That isn’t likely to happen either.

Democrats immediately directed most of their political fire at Bush’s proposed voluntary partial privatization option, citing the stock markets’ recent dips as evidence that workers could be lured into a plan that could put their retirement savings in jeopardy. In fact, the recent dips are evidence only that markets fluctuate; over the long term, investors tend to make money in stocks or less-volatile bonds. Bush has always made clear that he thinks the privatization option should go only to younger workers, who would be investing for the long term and be less threatened by market fluctuations.

A far more serious problem is that the payroll taxes shifted to private investments would have to be replaced so that Social Security could meet its current obligations. That is anticipated to cost a trillion dollars over the next decade. Since Bush is committed to using projected revenue surpluses to cut taxes, reduce the public debt and increase defense spending, it’s a mystery where that money would come from.

Partial privatization in any case won’t save Social Security. Under the best of circumstances, Bush’s idea would do no more than modestly augment retirement income. With or without the investment option, the system would still be threatened with going broke in 2037 as the ratio of workers to retirees steadily shrinks. What would save it? The answer appears to be the familiar trio of higher payroll taxes, reduced future benefits and a later retirement age, or a combination of the three. Bush has ruled out the first, and Congress has no taste for the other two. It looks like Social Security’s problems will continue to be pondered for years to come.