- The Washington Times - Sunday, August 21, 2005

It’s now almost certain the House will vote this fall on a Social Security reform bill to let workers invest part of their payroll taxes in U.S. Treasury bonds they would own.

Contrary to the belief President Bush’s investment accounts plan is dead, half of his reform proposal is alive and kicking in the House — the far less controversial part. The so-called “grow accounts” bond investment bill has the full support of House Republican leaders, including Speaker Dennis Hastert of Illinois and Majority Leader Tom DeLay of Texas, who is pushing for an early vote.

The only thing missing right now is Mr. Bush’s support. The White House has been cool to the idea, but conservative strategists say the bill would “pass the House in a heartbeat” with the president’s backing. While its prospects remain uncertain in the Senate, a roll call vote on its merits would return Mr. Bush to the offensive on one of his toughest issues, throw the Democrats into a thorny political situation, and, if it fails, give Republicans a great issue to run on in 2006.

“Grow accounts take Republicans out of the weeds on Social Security,” said Larry Hunter, vice president and chief economist of the Free Enterprise Fund, which advises Republicans on economic issues.

Whether the trimmed-down retirement accounts proposal will be part of a more comprehensive reform bill being assembled by Ways and Means Chairman Bill Thomas, California Republican, or passed separately isn’t clear, a senior House Republican leadership official told me. But the bond bill will come up for a vote in the House this year, “one way or another,” he said. “I guarantee this would not be in play if the speaker did not want it to be in play,” he added.

In the fierce political warfare raging over Social Security reform, Mr. Hastert and other Republican leaders have played their cards very close to their vests. But in a confidential internal memo Mr. Thomas sent to House GOP leaders earlier this month, he said grow accounts will “likely” be a part of the package he brings out of committee after Labor Day.

Democrats have been able to force Mr. Bush and the Republicans almost to a standstill on any plan including stock investments, saying it’s too risky, costly and would undermine Social Security’s future. They have not been able to make the same argument about investing in U.S. Treasury bonds because that’s what Social Security funds are invested in now.

The Republican plan, sponsored by Ways and Means Social Security Subcommittee Chairman Jim McCrery, Louisiana Republican, would allow workers to invest some part of their payroll taxes in such bonds, backed by the full faith and credit of the U.S. government. Here’s how it would work:

The Social Security payroll tax system takes in billions of dollars more than needed to pay out monthly retirement checks. The government takes this huge cash surplus and uses it as general revenue to pay its other bills. In return, the feds give the Social Security’s so called “trust fund” Treasury bonds that promise to pay back the borrowed money in future years.

Under the grow accounts proposal, workers who sign up would own a share of these bonds and the interest payments that would accrue from them over their working years. Instead of having nothing but promises that they will get their future benefits, they would own secure, tangible assets no one could take away from them when they are ready to retire and which could be left to their heirs.

“It’s a very positive first step,” said Social Security analyst David John at the Heritage Foundation. “The way the accounts are structured, there’s no risk. You would own the bonds. It would be your money and could not be spent on highways or other things.”

While the bond idea is less than the sweeping privatization reform conservative reformers wanted, they now see the stripped-down proposal as “the camel’s nose under the Social Security tent” that would eventually lead to a more expanded program including stocks.

The government’s thrift savings pension plan, that allows federal employees to invest in a half-dozen different stock funds, began as a bond fund “before it was broadened to include stocks,” Mr. John said.

“The president has it within his power to get his people to sit down with the guys in Congress and say let’s get personal bond accounts now,” Mr. Hunter told me. “He has the opportunity to move beyond the White House’s muddled message on Social Security.”

He’s right. It would end the spending raid on the trust fund. It would give Mr. Bush a huge victory in the House on one of his toughest challenges. It would sweep one of the Democrats’ biggest issues off the table long before next year’s elections. It would give younger workers the chance to build real wealth as a first step to reforming the entire system.

How about it, Mr. President?

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide