- The Washington Times - Thursday, April 25, 2002

Stop the presses: The Independent Women's Forum and the National Council of Women's Organizations have found some common ground. We both agree that the current Social Security system has some serious flaws. And we both believe that policy changes are needed. Alas, we part company on the nature of these changes. Republicans should gear up for a Social Security battle, because radical feminist organizations are already firing off their usual rhetorically (and politically) powerful but factually bankrupt ammunition.

Last week, Social Security reform proposals incorporating voluntary personal accounts were criticized at a press conference involving members of Congress as well as the National Council on Women's Organizations (NCWO). Generally, groups such as the NCWO are quick to censure Republican proposals, though they don't bother offering alternative plans. At last week's conference, however, Heidi Hartmann, the director of the Institute for Women's Policy Research (IWPR), informed skeptics that the NCWO had in fact previously offered such alternatives, which were available on the IWPR web site.

We both aim to give voice to the concerns of American women. Since we have to disagree, let's at least have an honest fight. The Independent Women's Forum believes that the NCWO proposal should be subjected to the same rigorous, nonpartisan analysis as were the proposals of the president's Social Security Commission. A review of the elements of the plan may reveal that the NCWO position does not truly reflect the opinions of American women in general. For now, we'll evaluate and score their proposal. May the best women win.

The 1999 NCWO/IWPR publication, "Strengthening Social Security for Women," reveals a grim picture of Social Security's future in the absence of personal accounts. It's the rough equivalent of trying to repair a complex piece of machinery with chewing gum, twine and paper clips and expensive ones at that. The proposal contains a substantial increase in payroll tax rates (the largest increase in the payroll tax base in history), government investment and ownership of trillions of dollars in the stock market, as well as a number of cost-adding measures that if enacted alone, would worsen Social Security's actuarial imbalance by 72 percent.

One major element of the proposal is the elimination of the cap on Social Security taxable wages that is, for the first time in history, all wages would be subject to the Social Security tax. This would be the largest increase in the taxable wage base since its creation, and most likely the largest single tax increase in history.

Another aspect of the proposal suggests investing 40 percent of the Social Security Trust Fund in stocks. Because the Trust Fund would ultimately reach several trillion dollars in size (exact figures have yet to be determined by the Social Security Administration), this would mean that the government would hold trillions of assets in stocks. Direct government investment of pension funds in private markets has historically resulted in politically targeted investments. Such government investment is prohibited by the president's reform principles and was condemned by a 99-0 Senate vote during the Clinton administration.

The proposal also suggests increasing the payroll tax by 1.8 percentage points in 2020 a 14.5 percent increase. Under the proposal, the payroll tax rate, even though applied to a higher base, would rise from 12.4 percent today to 14.2 percent in 2020.

Still another proposition is to vastly increase system costs and effective tax burdens. The proposal also contains various cost-increasing provisions that would, according to the NCWO, increase Social Security's existing actuarial deficit (under 1999 estimates) by 72 percent. Under current law, annual system costs are projected to average roughly 15.5 percent of the nation's wages over the next 75 years, going from roughly 10.5 percent today to more than 19 percent by the end of the valuation period. Though precise figures must be determined by the Social Security Administration, adding costs equal to 1.5 percent of payroll would likely increase total 75-year costs to roughly 17 percent of the nation's wages, with highs exceeding more than 20 percent of national payroll before the end of the valuation period.

Finally, unlike the president's framework, Social Security participants would not be able to choose whether to invest in the stock market through personal Social Security accounts. Forty percent of the Trust Fund's assets would be in the stock market, regardless of whether individual participants wished to be so invested.

The Independent Women's Forum finds it hard to believe that groups like the NCWO and the IWPR, which purport to represent American women, could endorse a proposal which obviously works to their detriment. In addition to mandating government investment in the stock market, their plan would vastly accelerate the Social Security system's unsustainable rate of cost growth, thus requiring unprecedented tax increases to cover the shortfall. How does this serve working women? Unfortunately, as passionate as they are, the NCWO is unwittingly substantiating the myth that girls just can't do math.


Nancy M. Pfotenhauer is president of the Independent Women's Forum.

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