Americans United Blasts New Social Security Reform Plan with Private Accounts
Americans United Opposes Any Diversion of SS Payroll Taxes for Private Accounts
Washington D.C - Americans United, the group which successfully beat back the President's effort to privatize Social Security last year, today came out against what has been billed as a bipartisan approach to Social Security reform because, as the President called for last year, it would include using a portion of current payroll taxes to establish expensive, risky private accounts - the very foot in the door for full privatization proponents of the President's failed plan have been seeking. The plan, devised by former Clinton White House aide Jeffrey Liebman, Andrew Samwick a former economic adviser to President Bush and Maya MacGuineas, a former adviser to Sen. John McCain (R-AZ) would devote 1.5 percent of current payroll taxes and a new 1.5 percent tax on wages to privatizing a portion of Social Security.
"Stealing a portion of Social Security payroll taxes to set up risky, expensive private accounts was a bad idea last year, it's a bad idea this year and it'll be a bad idea next year," said Americans United spokesman Brad Woodhouse. "The pro-privatizers won't stop at partial privatization and a plan like this is just the foot-in-the-door approach they are looking for to privatize all of Social Security and Medicare and to dismantle the social safety nets on which generations of American seniors have come to rely. Any plan to resolve Social Security's long-term financial issues which includes privatization is simply a dog that won't hunt."
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"SOCIAL SECURITY - White House Aide, AARP Question Bipartisan Overhaul Plan," CongressDailyAM, 6/20/06
Martin Vaughan
© National Journal Group, Inc.
A proposal to make the Social Security program solvent over the long term -- which is being billed as a prototype for a bipartisan compromise on the issue -- won praise Monday across the ideological spectrum for closing the program's funding gap and for doing so without more government borrowing.
But a key White House official questioned elements of the plan that would raise payroll taxes, while a representative of the seniors' group AARP blasted it for diverting part of the Social Security trust fund into private retirement accounts.
"This is a plan that relies more heavily on revenue [increases] than on benefit cuts," Special Assistant to the President for Economic Policy Charles Blahous said at a luncheon held by the American Enterprise Institute to discuss the proposal.
The plan was devised by former Clinton White House aide Jeffrey Liebman, former Bush economic aide Andrew Samwick, and Maya MacGuineas, a former adviser to the presidential campaign of Sen. John McCain, R-Ariz.
Blahous singled out for criticism one way the plan would increase revenues to make up projected deficits: lifting the current cap that limits the amount of wages subject to the Social Security payroll tax.
Since the plan would not increase benefits accordingly, such a move would at least for higher earners sever the link between what an employee pays into the Social Security system and what he or she collects in benefits.
"The political support [for Social Security] for decades rests on the fact that everyone that makes a contribution gets the benefit out of it," said Blahous.
Blahous also signaled reservations that the plan would create partial "add-on" personal accounts -- funded by combining 1.5 percent of existing payroll taxes with an additional tax equaling 1.5 percent of wages -- without reducing the traditional Social Security benefit to reflect what individuals had saved in the accounts.
The private account proposal floated by the White House last year, of which Blahous was the key salesman, included an "offset" to reduce the traditional benefit corresponding to how much had been stashed in private accounts, as a way to reduce program costs.
The Liebman-MacGuineas-Samwick plan has not been endorsed by any member of Congress, but is being publicized by its authors as representing the political compromises that would be necessary to make the Social Security program solvent.
It would bring new money into the system through lifting the payroll tax cap to 90 percent of payroll and the new, mandatory 1.5 percent contribution into private accounts. The plan would trim costs by gradually raising the retirement age to 68 and reducing scheduled benefit payments, and would phase those cuts in more quickly than other proposals.
From the other side of the Social Security debate, AARP Federal Affairs Director David Certner called the plan's 3 percent private account -- funded half from existing payroll tax revenues and half from a new levy -- "just the wrong approach."
"If something is a bad idea, simply cutting it in half doesn't make it a better idea," said Certner.
The Social Security Administration's chief actuary has found that the plan would return the Social Security system to solvency over a 75-year period.