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Social Security: Not for everybody anymore?
McClatchy Newspapers


May 26, 2005

Washington - For seven decades the Social Security system has been governed by a simple principle: In retirement you reap what you have sown.

Since Social Security's birth in 1935, old-age benefits have been tied closely to the payroll taxes Americans pay during their working years. In general the more you earn, the larger your benefit check.

That tenet, which historians say has made Social Security a powerful force in the lives of nearly all Americans, is now in question as politicians debate how to steer clear of the system's looming financial trouble.

Under a proposal advanced by President Bush, the ties between lifetime earnings and Social Security benefits would be loosened, and the system would transform into something more akin to welfare, with current benefit levels maintained for the poor but diminished by varying degrees for everyone else.

"I believe a reform system should protect those who depend on Social Security the most," Bush said last month in announcing a benefit-reducing plan he said would solve more than half of the system's projected shortfall.

The president's pronouncement was a bold stroke. He not only talked openly about restraining benefits - something few politicians had dared - but simultaneously seized ground normally held by his political opposition, suggesting that the system be tilted in favor of the poor.

It's uncertain, however, whether Bush's plan will have a political future. Democrats have not felt obliged to respond robustly, in part because they doubt the president will be able to win over a public that has been skeptical of the president's attempts to fashion new Social Security legislation.

But left-leaning leaders and interest groups have signaled the opposition's real response: They warn that Bush's plan, called "progressive indexing," could be the death of Social Security.

"The foundation of support that Social Security provides would be seriously eroded," former Social Security chief Kenneth Apfel told Congress recently. Throw in Bush's other big reform proposal, the option of private retirement accounts, and Apfel said the "long-term sustainability of the Social Security retirement system would be in peril."

The question of whom Social Security will serve decades down the road - the few or the many - is one of several fundamental issues being put to the nation in the unfolding grand debate over retirement security.

Bush also framed the first big issue, spending most of this year arguing that individuals must share more of the responsibility for retirement. His solution would be to allow Americans to take control of a portion of their Social Security contributions through investment in the stock market and other savings options.

Other large issues also loom. Is it time, for example, to raise the age at which full retirement benefits are granted? The normal retirement age is already in the process of moving up from 65 to 67, but even that advance isn't keeping pace with increasing life expectancy.

Republican Rep. Bill Thomas of California, chairman of the House Ways and Means Committee, promises to consider the age issue when he drafts Social Security legislation next month. For the moment, though, Bush is claiming center stage with his embrace of a benefits-slowing formula that favors the poor over the affluent.

The question it raises comes to this: Should Social Security continue to be a retirement system that supports virtually everyone, or do the financial implications of the baby boom's looming retirement mean that it should narrow its mission to supporting those who need help the most?

Proponents say the progressive indexing plan, first proposed by mutual fund executive Robert Pozen, would have multiple benefits. It would help ensure that the poor have retirement incomes that lift them above the poverty line. It would solve most of Social Security's solvency issue (nearly 60 percent by some measures). And it could pressure Americans to increase one of the world's lowest savings rates.

Opponents counter that the benefit reductions (as measured against the current system) would still fall particularly hard on the middle class, and over time would recreate some of the financial problems among the elderly that led to Social Security's creation in the first place.

Fundamentally, though, the core of this debate is a layer or two deeper. Opponents fear the real aim is to weaken Social Security over time by turning it into an anti-poverty program that no longer retains broad-based public support.

And that, in turn, leads to some Democrats' ultimate concern: that they'll lose arguably their most important issue, retirement security, allowing Bush to achieve a historic political realignment that ushers in a long period of Republican ascendancy.

Early soundings from public opinion polls suggest the president has his work cut out for him. But in a memo to fellow Democrats, strategists Stan Greenberg and James Carville warned that by not proposing a Social Security reform plan of their own, Democrats may be losing their longtime edge on retirement issues.

"Bottom line, Republicans may be winning the battle of seriousness, even as they lose the specifics of the Social Security battle," their memo said.


Distributed by Scripps Howard News Service.

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