Different Sides Bolstered by Social Security Report

Social Security is still on track to go broke, but not as soon as earlier reports suggested, the Congressional Budget Office said Monday.

Lawmakers and advocacy groups from different parties and perspectives all praised the agency’s new report -- but for different reasons. Both parties talked up the positions they have held for years, but with the backing of a new analysis that they said supported their case.

Democrats played up the CBO’s prediction that the Social Security trust fund should be able to pay out full benefits until 2052, 10 years longer than the Social Security trustees projected in March. They said the report showed that the system needed mere “adjustments” rather than a major overhaul.

Republicans, meanwhile, said the CBO report showed that Social Security was in crisis, and they recommended letting workers invest some of their tax payments into self-directed retirement accounts.

The response indicated that Social Security would probably remain a political hot potato through this year’s election campaigns, even as members of both parties say the issue should not be politicized.

Rep. Robert T. Matsui of Sacramento, the top Democrat on the House subcommittee on Social Security, sent President Bush a letter Monday calling on him to act “much like President Reagan did two decades ago” by convening a bipartisan group of lawmakers who would address Social Security’s funding problems without limiting themselves to outcomes such as privatization, benefit cuts or tax increases.

Matsui said that there were “all kinds of approaches” to addressing Social Security’s problems, but that none would go anywhere without presidential leadership. He said it was “incumbent on the president” to address what he called “one of the largest issues facing the country.”

White House spokeswoman Claire Buchan said Bush’s approach was to stimulate “a national discussion on the issue,” a debate she said was bearing fruit in the form of Republican reform proposals that call for “voluntary personal accounts.”

Last year, 47 million Americans received a total of $479 billion in retirement, disability and survivor benefits from Social Security, and the program ran a $68-billion annual surplus.

But the system is financed largely by payroll taxes, and as the baby boom generation begins retiring, the flow of revenue into Social Security from working Americans won’t match the flow of payments out of the system.

In their annual report on Social Security and Medicare, the fund’s trustees said in March that the retirement trust fund’s surplus would run dry in 2042, leaving the system able to pay just 73% of current benefits. The Congressional Budget Office, basing its analysis on more optimistic economic assumptions, concluded that the fund would remain solvent until 2052, when it would be able to pay 81% of benefits. The trustees predicted that Social Security outlays would exceed revenue beginning in 2018; the CBO said that wouldn’t happen for another year.

The trustees said in March that the looming imbalance in Social Security funds could be corrected with a 15% increase in taxes or a 13% reduction in benefits. Lawmakers of both parties, who call Social Security the untouchable “third rail” of politics, consider both options drastic and politically untenable.

The CBO report concluded that there were “only four approaches” for narrowing the gap between benefits and revenue. “And each of these approaches has drawbacks,” it warned.

The two most obvious are raising taxes or lowering benefits.

The third approach cited by the CBO would cut funding for other government programs and shift it to Social Security. But that is unlikely to make much difference, the report said, because the aging of the population will also lead to higher spending on Medicare and other federal programs.

A final option, according to the CBO, is to increase federal borrowing. Yet that would increase the federal debt load for future generations, requiring higher taxes or lower spending. Not included in the CBO’s analysis were the individual investment accounts proposed by Bush.

The CBO, whose role is to provide Congress with analyses of federal programs and laws, made no recommendations on the possible alternatives.