Social Security Investments Called a Start
Converting some Social Security benefits into private investment accounts isn’t enough for Rep. Bill Thomas (R-Bakersfield). The chairman of the House Ways and Means Committee said Tuesday that he wanted to take on Medicare benefits, the payroll tax and Social Security benefits for women at the same time.
Thomas’ committee will deal with the proposal, which President Bush plans to include in his budget next month, to divert some of the Social Security payroll tax into private accounts. In a symposium sponsored by the National Journal, Thomas said Congress had a rare chance to consider a wide range of looming problems together and develop something more than a piecemeal approach.
“I think we have an opportunity to adjust the system,” Thomas said. “My hope is that as we look at what we’re doing, we will address the problems of today and tomorrow. I hope that we don’t fight the political and ideological wars of yesterday,” he said. He warned Democrats that if they engaged in political posturing, Republicans would write the legislation themselves. “But it doesn’t look promising to me so far, based upon at least the beginning.”
Within hours of Thomas’ remarks, two Democratic senators held a news conference to denounce Republican plans to create private retirement accounts with Social Security tax money. Sens. Byron L. Dorgan of North Dakota and Debbie Stabenow of Michigan said exposing retirement savings to the risks of the stock and bond markets would jeopardize the bedrock of Americans’ retirement income.
“Social Security is not an investment program,” Stabenow said. “It is an insurance program.”
“We can make some adjustments in Social Security,” Dorgan said. “But we ought not injure or take apart the basic Social Security program the American people have relied on for a long, long while.”
That is not the goal, Thomas said. “No one is here to get rid of Social Security. We’re here to try to make sure that the system works, including Social Security.”
He warned Democrats, who are outnumbered in the Senate and in the House, that they risked eliminating themselves from a role in the forthcoming debate if they played the issue strictly for short-term political gain.
“If you start with the statement that your goal is to sabotage whatever we try to do, to try to put you in the majority [in control of Congress] in the next election, then I am forced to try to solve the problem on a partisanship basis,” he said.
If a plan is introduced that “cannot, given the politics of the House and the Senate, be placed on the president’s desk, every breath that’s spent on discussing that plan is an attempt to lay a political ground war for the next election,” Thomas said. “Save those breaths. Talk about what we need to do now that the president’s plan is on the table so that we can address, in a legislative way, a solution on a bill the president can sign.
“That would be, I think, a positive gesture. And I’m looking forward to those discussions and not a continual beating of what will soon be a dead horse of their proposal.”
Thomas noted that “we have some latitude in putting together a package which will help save Social Security that is perhaps broader than the theme” that Bush has focused on. He predicted that Bush would accept “other areas of change if he gets a modest portion of his suggested change.”
“Why don’t we examine the payroll tax itself?” Thomas asked. He called it a “fiction” that employers and employees pay a Social Security payroll tax of 6.2% each on every worker’s wages up to a cap of $90,000. In fact, he said employers acknowledged that the entire 12.4% came out of what workers would otherwise be paid.
The payroll tax discourages hiring, Thomas said, and, in remarks to reporters after the symposium, he hinted at the possibility of scrapping it in favor of an income tax or at least of lowering the tax rate and increasing the cap on the wages on which the tax is levied.
It also would be smart, Thomas said, to consider revisions to Medicare at the same time. Contending that Medicare’s costs were growing much faster than Social Security’s, he suggested that savings for long-term care would be more coherent if they accompanied general retirement savings.
The Ways and Means chairman said the entry of more women into the workforce and the narrowing of the gap between men’s and women’s salaries -- at a time when the gap between women’s and men’s longevity is increasing -- meant that Congress should consider whether men and women should get equal Social Security benefits. He did not say whether women’s benefits should be adjusted up or down.
“At some point, somebody might want to suggest that we need to take a look at the question of whether or not actuarially we ought to adjust who gets what, when, and how,” Thomas said.
Also on the table, Thomas said, should be the age at which workers can retire with partial or full Social Security benefits.
In the 1983 restructuring, Thomas recalled, Congress had to act quickly because the retirement trust fund was running out of money. Now Congress has time to contemplate a wide range of ideas, he said, because Social Security is expected to run an annual surplus through 2018 and to exhaust its accumulated surplus in 2042.
“I want as many ideas as possible on the table,” Thomas said. “We have the time. We have to be more creative.”
Times staff writer Janet Hook contributed to this report.