- The Washington Times - Sunday, January 16, 2005

Democrats have assailed Republicans’ call for Social Security reform, saying the program faces no serious woes for 40 or so years, but some analysts and observers say the system will face a real problem in barely more than a decade.

Robert Bixby, executive director of the nonpartisan Concord Coalition, said, “2018 is when the system begins paying out more than it takes in.

“From the budgetary and economic perspective, that’s the significant year,” he said. “It clearly is a problem.”

Democrats have pointed to the Congressional Budget Office’s projection that Social Security is “solvent” until 2052, because that is when the federal budget’s trust funds will be exhausted. The Social Security trustees themselves estimate this date to be 2042.

“[President] Bush is attempting to convince Americans that a crisis exists with Social Security so he can advance his ideological agenda, no matter the consequences,” said Rep. Peter A. DeFazio, Oregon Democrat.

“But once again, the truth proves him wrong. Social Security is not, in fact, bankrupt, nor will it ever be,” Mr. DeFazio said, citing the trustees’ estimate of 2042 as the first year that the trust funds won’t be able to cover all needed benefits.

But CBO Director Douglas Holtz-Eakin said the trust funds have “no real economic resources” to pay for benefits, so it is faulty to use the later date as the most important one.

“Insolvency is an accounting term that doesn’t bear an economic reality,” Mr. Holtz-Eakin said. “The key moments for Social Security are in 2018, cash-flow benefits will [equal] cash-flow payroll taxes, and then after that, the Social Security Administration will have to come back to the rest of the budget for additional resources to pay promised benefits. And that is that.”

Annual Social Security surpluses are credited to the Social Security Trust Funds, but have been used to cover government expenses, leaving in their place government securities, or “IOUs.”

“The trust fund is bankrupt; it is IOUs from the government,” said Sean Spicer, spokesman for Rep. Jim Nussle, Iowa Republican and House Budget Committee chairman.

Mr. Spicer said Democrats’ contention that trust funds can be used to make up the shortfall that starts in 2018 is “a disingenuous way of looking at the problem.”

Democrats and other analysts see it differently.

Kenneth S. Apfel, commissioner of Social Security during the Clinton administration, said the money in the trust funds is indeed legitimate government securities that must be paid — far from “worthless IOUs.”

“The trust funds help us in the long term,” he said. “Thank heavens that we raised that extra money over the past two decades and long into the future.”

“Social Security faces a challenge, not a crisis,” Rep. Sander M. Levin, Michigan Democrat, argued recently.

Rep. Jeff Flake, Arizona Republican, said Democrats for years “used Social Security to beat Republicans over the head,” urging action. But now that Republicans want to act, suddenly Democrats say there is no real problem.

“I find that ironic,” he said.

In his weekend radio address, Mr. Bush pushed his plan to allow younger workers to invest some of their payroll taxes in private accounts. He spent much of the speech laying out the case for action.

“Every year we put off the coming crisis, the higher the price our children and grandchildren will pay,” Mr. Bush said, citing 2018 as the year the program will “go into the red” and 2042 as the year it will “be bankrupt.”

But Democrats say enacting personal accounts would move the key dates up. Rep. John M. Spratt Jr. of South Carolina, the top Democrat on the Budget Committee, said under one possible administration plan the cash flow would turn negative in 2008, rather than 2018, and the trust funds would be exhausted in 2021 rather than 2042.

And House Minority Whip Steny H. Hoyer, Maryland Democrat, said Democrats “are ready to sit down at the table tomorrow with the White House and hash out a bipartisan solution.”

• Stephen Dinan contributed to this report.

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