The Future of Social Security
By: Annelena Lobb
The Social Security Network, November 1, 2001
Bush's campaign goal to save Social Security by creating private investing
accounts may be on hold - indefinitely - as the nation shifts its focus to
fighting terrorism and an economic recession.
A commission appointed by President Bush is developing a plan to allow
people to invest a portion of their money in stocks. Without reform,
Social Security is projected to begin running deficits in 2016.
But after Sept. 11, Washington lawmakers pledged $15 billion to help
airlines, $20 billion to aid New York City and another $1.5 billion to
fight bioterrorism. The list of upcoming defense and security expenses
looms large, and it's questionable whether government funds for the
transition to privatization will be available anytime soon, analysts said.
It's also unlikely that Congress will devote the time needed to pass a
Social Security bill in the near future. After the Sept. 11 hijackings and
the recent spate of anthrax attacks, Social Security reform is low on the
Congressional to-do list.
"Other issues are sweeping Congress," said Ira Siegler, a expert
on Social Security and a principal at the Unifi Network, the retirement
consulting arm of Pricewaterhouse Coopers in Teaneck, N.J. "There are
bigger priorities right now. I don't think Social Security reform will be
on anyone's front burner for quite some time."
The nation's expenses following the Sept. 11 attacks prompted worries
about the fate of the Social Security surplus.
Even before the terrorist attacks, the Congressional Budget Office said it
would have to dip into the Social Security surplus to meet costs. The
surplus is the excess money raised from Social Security payroll taxes
As of August, the Social Security surplus was about $156 billion,
according to a report by the Office of Management and Budget. Social
Security experts said it's likely all of this year's surplus will go
towards defense spending and other costs rather than the price tag to
"The major impact of Sept. 11 on privatization is the disappearance
of the Social Security surplus," said Marshall Wittman, a political
analyst at the Hudson Institute, a think tank in Washington, DC.
"Before the attacks, it was questionable whether we had enough money
available to pay for the transition to privatization. This makes the issue
even more difficult."
Cost of Individual Accounts
While estimates vary on the cost to privatize, it could cost trillions of
dollars, experts said. The price might be $1 trillion a year for 10 years,
according to one analysis by the Cato Institute's Project on Social
Security Reform in Washington, D.C.
Some Social Security pros argue that spending the surplus on other costs
will have no bearing on reform.
"The Social Security surplus is always being spent," said
Michael Tanner, co-director of Cato's Project on Social Security
Privatization. "Now it's going to defense and rebuilding rather than
paying down debt. From a psychological standpoint, spending it may even be
good for privatization. Opponents might use that surplus as a hedge,
saying we've got money in a lock-box and don't need to privatize."
Some analysts think next year's Congressional elections already pushed
reform to the 2003 agenda. "I don't actually think Sept. 11 will have
any long-term impact on the Social Security debate," Tanner said.
"2002 is an election year, so I always thought Congress would take up
the issue in 2003."
Others believe the 2002 -- and even 2004 -- elections will determine
whether privatization will happen at all. "If the President and
Congress are both Republican in 2002, then action favorable to the
President will ensue," said Henry Aaron, a political analyst at the
Brookings Institution, a think tank in Washington, DC.
Said Wittman, of the Hudson Institute, "Privatization is at best in
hibernation, and at worst awaiting a second Bush term, if there is one.
But it's just not going to happen during 2002, which is an election year,
and while we may be recovering from a recession, or still in one."
Where things stand
The commission has decided to issue its recommendations by the original
deadline of Dec. 20. Many had predicted a delay, because the commission
canceled its Sept. 18 meeting, following the terrorist attacks, and
because its co-chair, former Senator Daniel Patrick Moynihan (D-N.Y.), had
suggested postponing publication of the final report until next spring.
Randy Clerihue, the commission's press officer, said the commission had
set two final meetings, for Nov. 29 and Dec. 11.
"Since all of their policy decisions must be made in public, much of
the shape of their final recommendations will become clear at the November
and December meetings," Clerihue added.
For now, though, public attention to Social Security reform has all but
evaporated. "Social Security reform was not an issue that people were
in the middle on before Sept. 11," said Unifi Network's Siegler.
"Right now, they just don't care. I think that's where we'll be for
at least another year.
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