- The Washington Times - Tuesday, January 4, 2005

The political battle over President Bush’s individual Social Security investment accounts began this week, pitting two key groups against each other: workers younger than 50 who support his plan and older Americans worried about their future benefits.

Pollsters say the president’s plan to let younger workers invest a percentage of their Social Security payroll taxes in stocks and bonds is enormously popular with those younger than 50 — giving Mr. Bush a powerful advantage in the legislative lobbying war to begin on Capitol Hill over reforming the venerable New Deal-era program.

“From a polling standpoint, it’s definitely popular, particularly in its most modest form, two percentage points of the 6.2 percent payroll tax. When it’s presented that way, not only does support go up across the board, it is less threatening to older voters who don’t feel a sense they are going to lose anything,” said pollster John Zogby, who has conducted several polls on the issue for the Cato Institute.

Sensing growing public support for the idea, the administration is focusing on a plan that would allow workers to invest up to 4 percent of their payroll tax rate, though limiting total contributions to no more than $1,300 per year, the Associated Press reported yesterday.

The Washington Times reported Dec. 2 that the White House was considering a 4 percent plan rather than the more modest 2 percent usually linked to the Mr. Bush’s proposal.

Democratic leaders and their political allies, including labor unions and the AARP, already have begun their offensive against Mr. Bush’s proposal. The AARP led the charge in a series of newspaper ads that began running yesterday attacking the president’s private investment plan as too risky.

“There are right ways and wrong ways to strengthen Social Security. Passing on several trillion dollars in additional federal debt to future generations as a result of diverting money away from Social Security to fund private accounts is the wrong way,” said Bill Novelli, the AARP’s chief executive officer.

But supporters of Mr. Bush’s plan dismiss AARP’s charges.

“There are enough people who are personally invested in stocks who understand that it’s not gambling, that it’s a prudent way to save for the future,” said Derrick Max, executive director of the Alliance for Worker Retirement Security, a coalition of business groups that support Mr. Bush’s plan. “The AARP makes a lot of money selling annuities and insurance products. If they think those annuities aren’t being invested in the stock market, then I’d like to show them a money tree I have.”

Michael Tanner, chief Social Security analyst at the Cato Institute said, “Labor unions make the same argument against investing Social Security taxes in stocks, but all the unions have their pension funds privately invested in stocks.”

The idea of letting workers invest some or all of their Social Security taxes in stock or bond funds long has been pushed by conservative advocacy groups, such as the Heritage Foundation and the Cato Institute. But the idea really began to gather steam with the expansion of the stock market during the past two decades and the rise of the investor class.

More than 84 million people owned stock directly or indirectly through mutual funds, about 50 percent of the adult population, though that does not include defined benefit plans maintained by businesses, local governments and other organizations that also invest in stocks, according to the Investment Company Institute.

The AARP and other critics of Mr. Bush’s plan have focused most of their attacks on the fear of investing in stocks in a declining market, but Mr. Zogby said that fear is not shared by most investors.

“If you go just by the polling numbers, they indicate support for private investment plans have not gone down, even when the stock market declined. It stayed constant,” he said.

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