Social Security solvency scares politicians

House Republicans and Democrats are in agreement about one issue concerning Social Security reform — neither wants to tackle the system’s long-term solvency problems right now, as President Bush wants.

The leading Republican and Democrat proposals for Social Security and retirement reform in the House both buck Mr. Bush because neither fixes long-term solvency problems.

“Now’s the time to act on this,” Mr. Bush said Friday, after explaining Social Security’s long-term problems to a crowd in Atlanta. “I understand some in Washington don’t want to deal with the issue. It’s too politically sensitive … but in my judgment, when it costs 600 billion [dollars] a year every year you wait in order to fix the system, ultimately fix it, there’s nothing too sensitive.”

So far, however, the plan pushed by House Republican leaders only focuses on the personal accounts Mr. Bush has demanded. Supporters acknowledge the proposal — which would create personal accounts using Social Security’s surplus — doesn’t fix solvency, but they say it’s a first step.

And House Democratic leaders this week introduced a retirement package that combines changes to pension rules with new incentives to save more in 401(k)s and other existing plans. Their plan doesn’t touch Social Security solvency either.

One Republican member said “fear” is why no one wants to tackle solvency because it would involve tax increases, benefits cuts or an increase in the retirement age.

“Everybody … suddenly figured out reforming Social Security required hard choices and they reflectively backed away from that,” said Michael Tanner, Social Security specialist for the Cato Institute.

Some House Republicans insist the final House package this fall still may include solvency provisions along with the personal accounts measure. That package — which also is expected to include broad pension improvements and other boosts for private savings — is being crafted by Rep. Bill Thomas, California Republican, who has pushed for solvency to be included.

Mr. Tanner doubts that will happen because Republicans aren’t unified on solvency.

On Friday, Mr. Bush mentioned a solvency proposal he has pushed that would change the way benefits are calculated.

Rep. Paul D. Ryan, Wisconsin Republican and key backer of the House’s new accounts proposal, said Mr. Bush solidly supports the House accounts-only plan, but can’t back off from his public push for a solvency fix.

“I don’t think he wants to say anything that hurts the chances of getting solvency at the 11th hour,” he said.

But Derrick Max — director of the business coalition COMPASS, which is pushing for both personal accounts and a solvency fix — said Mr. Bush again pushed hard for solvency in a Tuesday meeting.

He added that Mr. Thomas is pushing House Republican leaders to include solvency in a final bill, arguing that, “we can’t go into an election ignoring the one thing we’ve been harping on.”

Meanwhile, the House Democrats say they are not addressing Social Security’s solvency problem yet because Republicans insist on private accounts. Once Republicans drop the accounts, Democrats say they will be more than eager to hash out the solvency issue.

Story Continues →