Two major conservative think tanks have embraced President Bush’s proposal to fix Social Security’s long-term insolvency, saying it will help jump-start his personal retirement accounts idea in Congress.
Officials at the Heritage Foundation and the Cato Institute said they liked Mr. Bush’s proposal to slow the program’s rising costs by changing the way future increases in Social Security retirement payments are calculated for middle- and upper-income workers.
“We very strongly support it,” said David John, a senior Social Security analyst at the Heritage Foundation.
“This would do two things, both of which are critical. First, this brings Social Security’s promises close to what Social Security can afford to pay. Second, this focuses benefits on people who need it the most, the ones who are least likely to have other types of retirement plans,” Mr. John said.
The indexing proposal endorsed by Mr. Bush at a press conference Thursday is the brainchild of economist Robert C. Pozen, a Democrat who served on the president’s 2001 Social Security commission.
Retirement benefits are calculated based on a person’s wages over his or her working life.
Under Mr. Pozen’s plan, people making about $110,000 or more would have benefits figured based on price increases, which tend to rise more slowly than wages. Benefits for workers making $25,000 or less would continue to be calculated on wage growth. Workers between these groups would see their benefits calculated on a sliding scale.
“I like it. Something has to be done to restrain the growth of benefits. Personal accounts help solvency, but they don’t solve the entire problem. This seems to be the best of a lot of tough choices,” said Michael Tanner, director of Cato’s Social Security privatization project.
“I don’t endorse Pozen’s entire plan because the personal accounts are too small, but I think this particular aspect of it seems to be right on track,” Mr. Tanner said.
In a memorandum written earlier this year, Stephen C. Goss, the Social Security Administration’s chief actuary, said that under Mr. Pozen’s plan, “the program would be expected to be financially solvent for the foreseeable future.”
But Mr. Pozen would allow workers to put aside just one-third of their payroll tax, now at 6 percent of their wages, in personal investment accounts as opposed to the president’s more ambitious proposal of up to 4 percent of wages.
Applying Mr. Pozen’s revised benefit calculations to Mr. Bush’s plan would alleviate about 70 percent of the funding shortfall, the president said Thursday night.
Conservatives said the proposal could appeal to lawmakers looking for a way to keep the system solvent for the long term without adding much debt.
“A lot of people will take comfort in Stephen Goss’ score of the 2 percent plan because it’s very close to Bush’s 4 percent plan,” Heritage economist William W. Beach said.
The Pozen financing plan first appeared in a Wall Street Journal article March 15 and quickly drew Mr. Bush’s attention. It since has been discussed on Capitol Hill by lawmakers of both parties.View Entire Story
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